The Dow Industrials recorded their highest close in nearly five years, but you’ll have to pardon us if we don’t sound too excited about it, at least not yet. In fact, the blue chip average has gained less than five percent in the last two years in relation to the important peak recorded in February 2004. That turned out to be the top of a very powerful, 12-month bull run -- one whose trajectory has flattened considerably since, giving us two years of tedium that persists to this day and notwithstanding yesterday’s multiyear high.

(Click on chart to enlarge)

From a hidden-pivot perspective, however, the bulls have good reason to be optimistic about what might come next. The chart above shows why. Note how the bullish impulse leg A-B announced itself with unmistakable force and clarity, surpassing two prior peaks of monthly-chart magnitude in the space of two years. Moreover, since that time, no decline has exceeded a prior low of any importance, much less the minimum two required to create a bearish impulse leg.

The big picture suggests a major consolidation borne of tireless patience and relentless staying power. And were it not for the series of declining stochastic peaks that has accompanied the last 30 months of the rally – a potentially ominous sign that we cannot afford to overlook – we would view the overall picture as one of incandescent promise. 

More immediately, if the current, minor-cycle rally were to exceed the peak at 11350 made in May of 2001, it would create a fresh, bullish impulse leg worthy of our earnest attention. Please take note that that top lies just 124 points above Wednesday’s intraday high.