Let the Market Run

 | Jan 22, 2013 | 2:15 PM EST
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I've maintained a bullish bias lately, but this market continues to exceed my expectations. Once again, it dipped early but the buyers stepped in and drove it straight back to new highs. They are still pushing as I write, and breadth has moved up to 3300 gainers to 2250 losers.

These sorts of V-shaped moves seem to be continuously fueled by short squeezes and underinvested bulls desperate for more exposure. While sentiment has been positive, there appears to be quite a bit of buying power on the sidelines. Being bullish hasn't necessarily translated into actual buying. I've been optimistic about the market but I still have too much idle cash. The more the market runs, the easier it is to stand aside and wait for entry points.

Small-caps stocks continue to be the star of the show. My screen is filled with secondary stocks that are walking higher, and there are 500 new highs so far today. Volume is light but that sort of price action is awfully tough to fight.

Keep in mind that markets that are hitting new highs don't just suddenly fall apart. The risk of big downside moves tends to occur when the market is already well off its highs. This sort of action creates a big supply of dip buyers and very strong underlying support. All the folks who missed the move keep hoping they will see a pullback soon, which will allow them to put cash to work. Of course, the market does its best to frustrate by producing these V-shaped moves that just keep on running.

Once again, I remind you: Wait for weak price action before you take a bearish stance.

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