The indices are continuing their ascent but momentum has slowed. It has been a good week and there is an inclination to lock in some gains in front of the three-day weekend. Markets are closed on Monday for the Martin Luther King holiday.
Strong markets tend to stay sticky to the upside but breadth is a bit softer today with around 3900 gainers to 3250 decliners. However, there are still over 1200 stocks hitting new 12-month highs so there is plenty of strength. A little profit-taking on a Friday after a good week is more likely a positive rather than a negative.
Next week, earnings season picks up speed with a number of important reports. Netflix (NFLX) , IBM (IBM) and Intel (INTC) will be particularly important. Action in semiconductors should provide some insights into the continuation of this powerful momentum.
There are many stocks of interest on my screen but almost all of them could use some rest. We need some consolidation to set things up into earnings season and that still might work with many of the smaller cap names that don't report for a couple of weeks.
From a strategic standpoint, the most important thing to keep in mind is that the odds that the market reverses and goes straight down from here are very low. If a top does form it will take a while and there will be some increased volatility as the bulls and bears battle back and forth. The first dip or two that this market sees are very likely to be bought aggressively. It is only after a failed bounce or two that sentiment will start to erode.
I'm not making any big moves today, but there are some pullbacks that are of interest, and I'll be working on my shopping list for next week.
