This has been one of the largest 3-week rallies in the S&P 500 since November 2004. The Santa Clause rally is coming early again this year. Even with the market being a stones throw away from hitting multi-year highs, I would feel a little more comfortable if the internals of the market improved - like trin and advance/decline. But, as a wise trader once told me, “Don't over think, just trade.”

Being a top down investor, I look for industries and sub-industries that are interesting. Then drill down to the individual stocks that make up the sub-industry group. One of the industries that appears to be heating up again is the metals, specifically gold. In the chart of the gold sector, notice interest and volume are starting to creep back into the sector after a pullback last month.

Gold Sector

Birch Mountain Recourses (BMD) is showing a classic bullish trend pattern. The stock had a nice run in November and took a pause Thursday and Friday. Looking at Friday's action, it sold off coming out of the gate, but buyers took control and pushed prices up the remainder of the day. If Friday's highs are taken out, this should start a new upleg.

Birch Mountain Recourses (BMD)

The broader averages are in oversold territory and we are very close to resistance points. As mentioned previously, take what the market is giving and don't over think the trades. Just be aware that we could have a pullback correction, so it is imperative that stops are used for your protection. Remember small losses are part of the game.

Tom Incorvia is a swing trader with 18 years of experience in the financial markets.  E-mail him at tincorvia@gmail.com.