Santa has come and gone, but stocks continue to look to add to gains. With only 4 trading days left of the year, it is only fitting to finish out the year on a high note. Stocks have had an incredible run since the begging of the year. Many have missed the rally simply because they thought they knew better. Had we listened to stock market pundits we would have missed a tremendous opportunity in 2019. We are in overbought territory and a quick pull back with some magnitude will hit us. Risk management will be important to avoid any significant damage. Let’s see how the rest of the week shapes up, but 2019 has been a solid year for gains.

The sentiment is favoring the Bull camp and it is not a surprise. Given the rally, we have seen it is not a mystery as to why sentiment favors the Bulls. AAII Bulls did come down 2 points, but still above 40%. We still have not seen an extreme reading, but this is the market we have. A record amount of cash remains in Money Market accounts and wait on the sideline. It will be interesting to see if the cash remains on the sideline in Money Market accounts or moves into another asset class. Bonds, stocks, or another asset class. Time will tell, but the price will always be the first indicator.

Heading into 2020 it would not be a surprise to see the market dip 5-7% in January. We have seen quite the push in stocks and a quick reset isn’t out of the question. It certainly does not mean this market won’t return to highs and head for a bear market. All rallies have intermediate corrections to reset. It will help us sort out the strong stocks from the weak ones. Which stocks hold up when the selling becomes intense? Those will be the resilient ones pushing higher when the selling is over. Strong stocks are the ones we want to watch and ride. The weak need to be discarded. Stick with winning stocks.