Tuesday, December 1, 2009

The Pattern Holds True....

Certain patterns have played out in this market since March. One of the most notable has been the strength in the first week or so of each month from August through November. Today is only the first day of December, but the pattern is repeating so far.

It was an extremely strong day with about 3 to 1 positive breadth and all major sectors in the green. Banks were weak, but the XLF managed a flat finish. Once again, weakness in the dollar was one of the primary driving forces. That helped push gold to new highs and perked up oil. Oil has been showing some relative weakness lately and still has work to do in order to improve the technical picture there.

China stocks were the place for some wild momentum today, and many of them looked downright frothy. Momentum has been narrowing lately, so there is increased focus on a smaller group of stocks, which is why there were some exceptionally strong little pockets of action.

It is very easy to come up with fundamental reasons to distrust this market, but it is just plain foolish to fight this type of strength. The pragmatic traders out there are holding their noses and buying, and that is why it feels like there is an undercurrent of dislike for a market that keeps racking up big gains. It's a peculiar market environment because there is so little celebration, although many are obviously doing quite well as they ride the strength.

There are a few troubling considerations under the surface, such as the narrowness of the market until today, but if history is our guide, then we should be looking for more strength in the early part of the month. If nothing else, the bulls still deserve the benefit of the doubt....

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