Montreal, Canada

The bears are running for cover in March. After touching important support levels recently, many averages are now on the verge of breaking-out.

Several U.S. benchmarks broke into new territory last Friday as they surpassed previous highs established in January. The move might signal a broader trend as other indices join the rally.

The S&P 600 Small-Cap Index and the Russell 2000 both closed at new highs for the year on Friday. The S&P Mid-Cap 400 Index also closed at a fresh high. Small and mid-cap stocks now trade in positive territory in 2010 with gains averaging about 6%.

The NASDAQ Composite also closed at a high for the year on Friday, joined by the Value Line Composite. Both indices are up 2.5% and 5.8%, respectively, in 2010.

But the broader market or the S&P 500 Index has not surpassed its mid-January high – at least not yet. The S&P 500 Index closed at 1,138.70 on Friday, just 1% below its best level this year.

The odds favor a break-out for the broader market as the primary trend turns positive again for equities following Friday's jobs report and recent bullish economic data.

Still, stock prices aren't cheap. The S&P 500 Index trades at 22 times historical earnings and barely yields 2% in dividends. That's not exactly an undervalued market. Yet market measures of risk, the CBOE Volatility Index, continues to lose support; the VIX hit a fresh 18-month low on Friday and now trades at just 17.42, down 19.6% this year while crashing 65% over the last 12 months on the heels of a spectacular stock market recovery.

You can't fight the tape. Stocks are moving higher again over the last three weeks and have managed to escape a deeper decline. This is exactly the same kind of price action we've seen since last spring when stocks started a massive recovery rally after hitting 12-year lows on March 9. Since then, stocks have come close or have violated important long-term support levels only to swiftly recover.

Still, this rally is not supported by expanding stock market volume. NYSE-trading volume hit just 4.3 billion shares on Friday – a suspicious number considering that several market barometers hit fresh highs for the year. Throughout this historical rally, stock market volume has remained far below previous trading volume levels, suggesting most participants are not putting fresh money to work as stocks climb even higher.

The odds favor new highs this week for the Dow and the S&P 500 Index.

Alas, the bears' time has not arrived. The bear will have to remain in hibernation, at least for now.

I'm off to Texas tomorrow. Dugald will post a blog on U.S. technical market trends. I'll be back from Las Vegas on Wednesday.