Traders are waiting for minor correction to jump in this overbought market in order to enjoy the year end rally

S&P 500 index closed at 1176.19, up 2.38 points. Stocks gave up early gains and finished mixed after a wave of headlines Friday. Fed Chairman hinted at more action, while most economic reports beat expectations. Stocks ended mixed Friday as weakness in the banking sector dragged on the Dow, while technology shares stayed strong.

One of the internal indicators, the slow stochastic, flashed a short-term sell signal. And the American Association of Individual Investors (AAII) survey was released yesterday, showing a drop in bullishness by 1.9% to 47.1%, which is still much too high for this contra-indicator. AAII points out, "This is the sixth consecutive week that bullish sentiment has been above its historical average of 39%."

Now all of this may mean little and even seem overly cautious. And the market could continue to make a run at the next significant resistance, which is 1200 for the S&P 500.

As for trading strategies, when approaching an area of significant resistance, like S&P 1200, it is wise to cut down on the size of new positions and take smaller profits rather than going for the home run. Such resistance zones are there because investors sold at these zones before.

In the mean time, I think most of the traders are waiting for minor correction to jump in this overbought market in order to enjoy the year end rally.