Watching the Market Churn

 | Dec 01, 2011 | 2:28 PM EST
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It is slow going out there but the market is holding up very well as it consolidates recent gains. Given the magnitude of the recent move, profit-taking is to be expected but so far it is very well contained. That is an indication that dip-buyers and underinvested bulls are worried they will be left out, so they aren't even waiting for any real weakness before they step up.

Even after the major indices work off some of the overbought conditions, they will still have to deal with some pretty strong technical overhead. The S&P 500, for example, is facing the November highs and the 200-day simple moving averages around 1265-1275.

While the resistance levels and the overbought condition are fairly obvious, the way this market continues to climb higher is still surprising technicians. Usually, we see light or declining volume and poor news flow as well, which makes the persistence to the upside even more surprising. I suspect more money has been lost in this market trying to fight upside than anything else.

So far, we are seeing exactly the sort of action that bodes well for further upside. In fact, it would probably be better if we had more weakness to shake out weaker hands and let the dip-buyers in.

I'll be looking for upside plays -- the longer the market churns, the better it will set up a Santa Claus rally.

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