After the run the market has had off the October lows it is logical to look for the indices to rest or pull back. When gains occur quickly there will always be some traders, with shorter-term time frames, who want to lock them in. That process usually produces some softness but ultimately provides a foundation for an uptrend to continue.
The trading range of the indices this week was narrow as some of the consolidation activity took place. However, there was still a positive bias and the S&P 500 managed a decent gain. While overbought conditions still exist, they are not quite as severe as they were on Monday.
The bears continue to be confounded by the constant celebration over progress in "Phase One" of the trade negotiations with China. Even news that the U.S. did not agree to roll back some planned tariffs had little impact on the action. All the market seemed to care about is that there is some progress taking place even if the meeting date was pushed back and there are still some contentious issues.
Flat markets are often good for trading and stock-picking as the best stocks tend to stand out a bit. That wasn't the case this week, however. There was quite a bit of lackluster action and it was tough to find pockets of strength. Banks did well and biotechnology finally jumped Friday but if it wasn't for Apple (AAPL) and a few big caps, the indices would have been in much worse shape.
There was some notable action in bonds (iShares 20+ Year Treasury Bond ETF (TLT) ) and gold (SPDR Gold Shares (GLD) ), which both suffered technical breakdowns. This is due primarily to strength in the dollar but is a good illustration of how the market isn't currently focused on another quick rate cut from the Federal Reserve.
There are quite a few loud bears right now predicting some downside but that seems to work as a contrary indicator instead. Many of the bulls wouldn't mind some softness either, for better entries, but this market is extremely sticky to the upside.
Once again, I remind you to stay reactive and don't get caught up in the prediction game. When the market action turns ugly there will be time to make the proper adjustments.
Have a good evening. I'll see you Monday.