Market Plays Santa...

It's that time of year with the market hanging tough into the teeth of some overbought, froth driven conditions. There's no question that sometimes the belief of something can dominate, and, as usual, usually at the expense of the bears. There's a real belief that the market will always rally ahead of X-mas week, and that can often push the bears to the sidelines, while the bulls get more aggressive once again. The bears, having already given back those once-captured 20- and 50-day exponential moving averages, don't really stand much of a chance, since giving back those levels have them feeling lost in terms of their confidence.

They're just not pushing hard to take those key levels back for now. I'm sure they think things are hopeless for them. That's probably not the truth, but that's how they probably feel, and who can blame them short-term ahead of the feel good time of X-mas and the New Year. This, of course, is creating more froth, and more in terms of being overbought. Not good, but no one caring yet. They may in time, but, for now, it seems retail is in charge. Big money standing back allowing the retail players to bring up their stock holdings. Just be aware that froth is out of control and things are overbought. Maybe we can stay that way through the rest of the month. Seasonality says yes, but it's very dangerous to play just on seasonality.

Unfortunately, there are always problems on a daily basis. Gilead Sciences Inc. (GILD), one of the true great biotechnology stocks, received some bad news today. Express Scripts said they would use a cheaper form of the Hepatitis C drug from another company. It took GILD dynamically lower along with others in that sector in sympathy. These stocks usually have great news. It's very unusual for them to perform so poorly, but this type of news does hit from time to time, and when it does, it usually hits harder than anyone thinks possible. You hope in time it will recover, but in an environment of great froth you need to be very careful about avoiding the higher beta, risk stocks. Just some food for thought, until things calm down, which would occur if we were to get some decent selling. Any stock can get hit at any time as we all know, but all you can do is your best to try and avoid the higher froth, risk stocks when the market itself is very frothy. Be careful out there and remember to use stops.

Wednesday we will get the numbers on the bull-bear spread, which last week gave a shocking surprise. With the action the prior week, bearish for equities, I would have thought things would calm down, but, instead, actually held, only to see it rise afterwards to the mid 30's once again. Is it possible we'll see near 40% again? We hope not for this would not bode well big picture. Simply too many tests up there. Not good. The number won't be good for the bulls. While the market is holding up we are getting more selling junctures now of 5%, or more. One of these times it won't stop at 10%, if this keeps up. The froth is really out of control. However, for now, we focus on the 50-day exponential moving average on the S&P 500, which stands at 2022. Until the bears take that out they have nothing going for them. But please recognize risk is increasing daily.

Take it slow and easy just one day at a time.