Editor's note: Combining his passions for the markets, humor and food, "What's cookin' with Kenny Polcari" is a blog published twice weekly on CNBC.com. With more than 30 years of experience on Wall Street, Polcari provides insight and analysis on the markets, as well as a recipe du jour. Buon appetito!
After Chinese and German flash PMI figures met and exceeded expectations, and as longer-term investors reassess their portfolios going into the final two months of the year, the stock market turned higher Thursday. Investors like seeing those green arrows on the screen, and I think they'll like my recipe for chicken thighs bathed in herbs and white wine, too, but more on that later.
(Read more: China unlikely to see a repeat of June cash crunch)
The bottom line is that the broader market is up 6 percent off the debt crisis lows after it became clear that the Fed isn't going away. So the market does need to catch up with itself as it considers the legitimate risks remaining.
Yet investors do not appear to be concerned. After being held hostage with the debt ceiling and government shutdown, investors are now concentrating on the macro and micro fundamentals of the economy, and they like what they see. Or is it that they have no other choice if they want to be invested and yet also want liquidity?
With such strong gains at this point in the year, many asset managers will work hard to protect those gains. Do not expect them to make any drastic decisions unless forced to. There is no reason to make any big bets either way or risk taking a hit to year-to-date performance.
Analysts will tell us that this earning season has been "not so bad." Of the 140 S&P companies that have reported to date, 74 percent have exceeded earnings forecasts (yes, lowered forecasts, but the market knows that), and it is about 50/50 on how many have missed revenue expectations. That means that 50 percent have beaten them, which is of course key for continued profit momentum. It is about accentuating the positive and eliminating the negatives.
Wednesday's action saw cyclical come under pressure. Energy stocks fell as the price of oil moves still lower; financials and basic material names were also used as a source of cash as money moved into the safety trade. Winners included home builders (as 10-year yields drop below 2.5 percent), consumer staples and big industrial names thanks to the Boeing report.
(Read more: Ford earnings beatestimates; lifts guidance)
The chatter is now heating up. What will happen in December? What will the holidays shopping season bring for retailers as they are already jockeying to attract the buyers. Remember, the holiday season accounts for 25 percent to 40 percent of retailers' annual sales, so it is key for detailing consumer health. Are they exhausted yet or will retailers offer such deep discounts that shoppers just 'could not leave it on the shelf'?
Surveys do show that retailers are expecting a rise in holiday sales. That's all good, but then what happens to margins? Will sales volumes make up for margin compression?
(Read more: Holiday wars: Target pushes online, price match)
Looking at Thursday's market, my sense is that we will test the highs again of 1,757 on the S&P and then back off again remaining in the tighter 1,740-1,757 range. Any break lower would see a test at 1,725.