Today the S&P 500 squeaked to the highest level in 17 months, finishing the day at 1150.24. The previous high was set on January 19th at 1150.23. In late January and early February the market slipped by more than eight percent as investor took profits and worries about Greece and the debt crisis took center stage. For a while it seemed that a new correction may have been starting, but at least for now it seems that was just a temporary bump in the road to the recovery.

Over the last few weeks I have heard a lot of complaints about the volume in the market being lighter than most people would wish. While I understand those concerns, I think the process the market has been going through is a very normal one. After a huge run last year many investors took to the sidelines in late January, but over the last few weeks the market seems to not want to go lower. A television commentator wisely called what has happened the last few weeks a “melt up of the market.” The market hasn’t been setting any records on speed of a gain, rather it has just slowly moved higher as investors digest the current news.

After a great run like the market had over the past several months I think it is a good step to see a period of market digestion, and it certainly is encouraging that during that time it seems that even negative news hasn’t been that much of a drag on the stock market. The slow churning of the market right now might be boring and difficult for some traders, but the truth is it is a very healthy process for the long run. So long as the market holds it own during the quiet period I think the  signs are positive for the next big move in the market.

Things are still looking gloomy even after the zero percent interest rate. There are not many reasons to be enthusiastic about the economy or stock market. Economists warn that GDP could fall 6% for this quarter. If that happens, you can expect the market to go even lower. S&P 500 is struggling to close above 50-day moving average since June. If GDP plunges further, S&P 500 may not recover for many months to come.

There may be a brief rally in the next 7 days. But, that may be short-lived. I don’t have hopes for usual December-January rally. This year is going to be different, because the recession we are in is deep and nasty.

If you are going to put new money in the market, be careful and choose your investments wisely. If you are not sure, it’s better to stay in the sideline and just watch the market.