What's Driving Market This Week

Though this is traditionally a slow week, there are several underlying trends to the market:

1) Nothing for sale: no concerted signs of traders booking profits post-quadruple witching. This is likely because many have significant gains and do not want to cash in for tax purposes.

2) Rotation into unloved groups: builders, banks up AGAIN today...the entire homebuilding universe is up about 18 percent this month, most of the large banks are also up double-digits...what gives? Traders are betting that as the broad market improves...there will be rotation into the unloved groups.

3) Retail stocks: stock price runups are the problem, not sales or margins. Despite continued strong reports for Christmas retail sales, retailers are flat today. The good news: most retailers will see sales up low to mid-single digits this Christmas.

Target should see total sales up about 4 percent,

Wal-Mart up 4 percent,

Gap up 2 percent,

TJX up 4 percent,

Macy's up 5 percent,

Nordstrom up 8 percent,

Kohl's up 6 percent.

Best Buy an outlier: down 1 percent. The bad news: plenty of incentives that might cut into margins, but for the most part I hear promotions are on-plan...The real problem in retail: big price runups in the stocks...many are at new highs on the stronger sales and on M&A activity with J Crew and Gymboree. The smart money on the street went long in early November, and they have been right.

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