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The market could not find a bid yesterday and we saw selling almost across the board. Large caps, small caps, Tech, Transports, etc., were all down sharply as the debt ceiling panic grows and the deadline gets closer. The Dow lost 256-points and there were similar percentage losses in the S&P 500 and Nasdaq. However, something happened after the closing bell that may change things at least for the start of today.

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The indices continued to retrace last week's big 2-day rally, and perhaps right on cue as we enter the pre-holiday reversal period, and the debt ceiling deadline quickly approaching closer. The Dow lost 231-points, but worse than that was the negative reversal in many indices as the small caps were on the verge of a breakout, but instead failed and rolled over. Yields also rolled over as bonds were up for the first time in 8 trading sessions.

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After a mini-breakout in the S&P 500 last week, stocks chopped around on Monday in a tight range, closing mixed but mostly positive. The Dow lost 140-points with retail, energy and large banks dragging the index down, while the S&P (C-fund) and the I-fund were flat, and the broader indices like the Nasdaq and small caps saw modest to strong gains. Bonds were flat to slightly lower as yields continue to rise.

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A positive open on Friday turned negative by the close for the stock market, so the winning streak for the indices stopped at two, but it was quite a two day period as we finally saw the S&P 500 move to new highs for the year. A little retracing of a big rally is common, but the bulls really want to see some dip buying before any pullback gets serious during this pre-holiday week. The charts look good. The news / story doesn't. Who's got it right?

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The bulls found some footing mid-week to give life to what was becoming a dull and directionless stock market. Price range had been shrinking tighter and tighter in the previous week and that continued through the first two days of this week. But top government leaders sparked a two-day rally Wednesday and Thursday when they reassured Americans the U.S. will not default on debt. The confidence that debt-ceiling negotiations were going well was a sigh of relief for the nervous market, ...