Many of the indicators we watch have been pointing toward a break higher for markets along with commodities. There have been a few that were stuck in neutral while others were flashing BUY.

One of our favorites have been the McClellan Oscillator along with the NYSE Advance / Decline oscillator, the latter we created. Both of these have moved up in a very sharp trajectory and that is usually a sign of a market that is overheating.

This Week in the Markets is a weekly series that describes, at a very high level, how we manage our long-term portfolio. We use John Murphy’s inter-market ideas, looking at the performance of equities, bonds, commodities and foreign exchange markets. We attempt to measure appetite for risk, and from that draw conclusions on whether to go long or short these asset classes.

We have various proprietary market algorithms, risk and commodity indicators that we use. But they are for another article. What we show here is intended to be understood and acted upon by investors of every level.

A better than expected jobs report pushed overbought conditions to extremes, leaving the Weekly ETF Rewind looking as extended as I have ever seen it. While this may be suggestive of an imminent pause or retrace, it is also emblematic of the persistent strength that this market has shown, and I'll frankly be more surprised than not if we don't see a near-term breakout of the S&P 500 to match its major index brethren at new bull-market highs. In fact, the strong week left the S&P 500 (SPY) and Russell 2000 (IWM) higher by +3.2% and +6.1%, respectively.

(Click Image to Enlarge/ ETF Rewind Glossary)