I have called this the unshortable market for many months as it acts very strange.  Again it is not so much the move up that is strange as the total inability for even short term pitstops in the months of Sept, Oct, Dec and thus far January.  November was an outlier event due to Ireland ...save for those headline events I am sure November would have acted similar to the other months.

Frankly as a contrarian when you hear people talking about unshortable markets you want to fade that...but doing so the past many months would have ripped your face off. So do we just give up until Jul 1 and QE2 ends? I doubt it will be that convenient.  During QE1 there were at least a few pullbacks...summer 09 comes to mind.  Further almost every strategist now thinks SP 1400 to 1425 is in the bag for year end 2011.  The problem is we are about 10% away from that target just days into the year.  Considering there are 11 more first days of the month this year (which are now almost always up) and 51 more Mondays (which lead to morning gap ups about 80% of the time nowadays) that does not leave much leeway for Monday afternoons through Friday for price appreciation.  Unless we are headed to a repeat of fed induced bubble mania circa 1999.

In the near term complacency is supreme.  But I could have said that 3 weeks ago or 13 weeks ago. The retail investor after a few years of fleeing the market is finally returning.  Equity inflows are positive the past few weeks.  (Don't ask how a market rallies 80% in 2 yrs without new inflows...its the new magic)  So that is a new event and again from a contrarian standpoint not a great one.  Generally the retail investor is last to the party and handed the bill.  But we do not live in normal times nor normal markets so we'll see how that goes.

I said early this week I would be interested in attempting a short strategy for the first time in a long time once the news was out of the way this week.  I like SP 1280 as a stop out point and I would probably be interested even more so if we get the traditional Monday morning gap up.  If the SP blasts through 1280 and makes a run for the roses next week...so be it, one has a defined level to trade against and stop out from.  But at minimum a hedge like VIX calls out a few months (April) seems sensible after a 4+ month run.  This is where I would be starting today in the low 17s.  One day people will believe the market can go down again and I would expect VIX to reflect that by popping into the low 20s.  So some April 20 or 22.5 calls make some sense to me.

Earnings begin next week and while the first few weeks are dominated by the multinationals who have the best of all worlds, many are priced 30-50% higher than they were last earnings season.  Thus the bar is much higher as we saw  yesterday with the reaction to december same store sales in the much worshiped retail space.