Despite a shaky start to the new year, most of the major indices are once again at new highs. The S&P 500 is trading at a new six-year high, while the Dow Jones, Russell 2000, and S&P Midcap 400 indices concluded the week at fresh all-time highs. Only the Nasdaq Composite, which failed its breakout attempt in mid-January, remains in a range. The market has certainly been resilient and the overall trend remains "up," but we noticed that rallies over the past month lack the power they formerly had. Rather than valiantly galloping to new highs, driven by powerful sessions of institutional buying, the major indices have been grinding out their gains with minimal momentum. Such action could conceivably carry on for a long time, but we view it as a market that is getting tired. So what has prompted this potential change in the market's underlying momentum? A look at the long-term monthly charts may shed some light on the situation.

As short-term traders, we tend to focus primarly on chart patterns that develop on the hourly, daily, and even weekly charts. However, studying the long-term monthly charts on a regular basis is important because it enables one to know the "big picture" of where the market stands. In turn, it becomes easier to make sense of perceived changes in market sentiment. Below is a monthly chart of the S&P 500 Index:

As you can see, the S&P has been trending steadily higher for nearly four years, since about the middle of 2003. From 2003 through 2006, a clearly defined trend channel developed, which is illustrated on the chart above. Until the end of 2006, every rally into resistance of the upper channel was followed by an eventual move down to support of the lower trend channel. But since November 2006, the S&P has been trading above resistance of the upper trend channel. Furthermore, January marked the eighth consecutive month the index has closed higher. The last time the S&P managed to gain for eight months in a row was from November 1995 through June 1996, more than ten years ago! During that period, the S&P 500 rallied 15%, but the ninth month was nasty. In July of 1996, the index plummeted as much as 9.7%, more than 60% of its eight-month gain, before closing the month with a 4.6% loss. Curiously, the current eight-month winning streak in the S&P stands at a very similar 14% gain.

Obviously, we have no way of knowing if this history will repeat itself this month, but this historical information should at least serve as a reality check for bulls who are fearlessly buying at current levels. The parabolic rally above the upper channel of the long-term uptrend, combined with the fact that the S&P has not seen a meaningful correction in nine months, should serve as a yellow flag for astute traders. We're not advocating fighting the long-term uptrend, but merely warning against a stock market killer named "complacency."