The recent frenzy of buying finally cooled off a little on Friday, but the indices continued to hold extremely well. There was some profit-taking in some of the hottest sectors, like semiconductors and biotechnology, and small-caps lagged. Breadth was negative for the first time in a while, with about 3300 gainers to 4150 decliners. However, there were still over 800 stocks hitting new 12-month highs, which illustrates how extended the market has become.
There are only two more full days of trading left in the year and there really is no way to predict what will happen. While there will be some resistance to taking profits this year, there will also be window dressing and positioning for the new year. Some market players like to raise large of sums of cash to end the year and that can result in some surprising selling pressure.
Another issue that may impact what happens next week is that the Fed may shift the pattern of liquidity it has created due to chaos in the Repo market. Much of the recent rally has been driven by what Fed Chair Jerome Powell called not-QE. That dynamic will change in the new year.
Once again, I emphasize that the best you can do is to try to keep your portfolio as close to its high point as possible. Protect gains and don't let losing positions gain momentum. If you do that then you will be in great shape for a great 2020.
Have a good weekend. I'll see you on Monday.
