It was an interesting week of action, and even though we lost ground, it had a more normal feel to it. We started with two big losing days after Greece bailout euphoria the previous week. We pulled back right to key support at the highs of the recent trading range, then bounced nicely before some mild selling hit today.
Although stocks remained highly correlated, what was interesting about the action was that the pullbacks and bounces in the indices had a more natural rhythm. It didn't feel like we were being pushed around by the computers and exchange-traded funds to the same degree as when the market went straight up in early October.
We were still highly sensitive to the news headlines, but there were a few subtle signs that stock picking might actually matter again. I've been anticipating that as things settle down in Europe, market players would focus more on individual stocks to try to rack up performance before year-end.
The intense focus on Europe has created quite a bit of bearishness lately. They obviously have a mess to deal with and their problems won't be solved quickly or easily.
The negatives are so obvious that they create good conditions for climbing a wall of worry. There are a lot of very underinvested bulls looking for entry points, and they will keep pushing the market up as they try to put capital to work.
I don't expect smooth sailing, but I do believe conditions will be favorable for upside as the year winds down. We only have 38 more days of trading in 2011, and I expect some good action as market players try to enhance returns.