In the past couple of weeks we have seen a steady stream of secondary offerings and insider selling. Much of this is likely due to the tax increases going into effect in January. Over $14 billion of secondaries have been announced this week alone. This additional supply of stock will make it difficult for the market to make much headway.
I was hoping for a decline this week that would dampen sentiment. Instead the modest advance has sent sentiment towards excess bullishness. The AAII bears, Investors Intelligence bears, Hulbert newsletter writers & the NAAIM are all approaching levels of excess optimism.
I believe that the risk in the near term is to the downside and have added to hedges as the market has climbed. The market has laughed at my plans for a decline and then a rally into year end. I still believe this can occur but the timetable has been pushed out a bit.