"Christmas is a time when kids tell Santa what they want and adults pay for it. Deficits are when adults tell the government what they want -- and their kids pay for it." --Richard Lamm
We had typical holiday trading Thursday as we drifted higher on light volume and an upbeat mood. We continue to drift higher again this morning as Congress has resolved the payroll debate and there is no substantial news to affect trading.
It's nice to see optimism and positive action, but it is not going to be easy to do much in this environment. The lighter the volume, the more random the movement is going to be. Plus, after a 4% upside move in the S&P500 in three days, we are technically extended a bit as we run into resistance at 1259, which is the 200-day simple moving average.
I've recently been discussing how the market has a tendency to go from oversold to overbought very quickly, but what makes it even more challenging is that we tend to become more severely overbought before a pullback ensues. If you have been premature trying to sell into strength, you tended to pay a very heavy price.
I'd like to offer some compelling insights about how to deal with the market today, but the biggest mistake you can make is to overlook the fact that it is going to be random and slow. We can very easily be jerked around in either direction, depending on the mood of the computers or the whims of year-end planning by big funds.
The overhead resistance in the market is obvious at around the 1260 level, so there are likely to be some folks leaning on that level. That could produce some squeezing action if the buyers don't back down, but I suspect that further upside is going to be tough to trust.
We'll see how thing develop and, hopefully, we will have pockets of trading action, but I suspect that the focus of market players today will be preparing for the holidays rather than the stock market.