December 6, 2010 Stock Market Recap

While I’m impressed with the market’s ability to hold up over the last couple of sessions I’m not thrilled with the action. I’ve always been wary of an instrument approaching old highs on declining volume and that’s exactly what the Nasdaq and S&P 500 are doing now. This is an interesting juncture. The action over the last two sessions reminded me of the old saying: “If it’s supposed to go down but it doesn’t then it’s going higher.” However, with the market being short-term overbought and bumping up against resistance I would not want to initiate new longs here. Stepping back to a slightly longer time frame, I’d certainly be holding if I was already long from lower levels. I might consider selling if we broke last Wednesday’s lows but otherwise I’d just try to ride out any minor shakeouts.