A glance at the major indices today painted a troubling picture and the action under the hood was not much different. Technology and small caps limped into today after a severe beating only to be met with rapid fire selling and continued punishment. The selling came hot and heavy as bids disappeared sending once loved momentum favorites into the abyss. The action seemed panicky as we could almost picture the multitude of towels being thrown in the trading ring, calling it a year. We suspect this early action washed many participants out, which set us up for a quick snap brining some life back into the market. Unfortunately, the positive action that was bubbling under the surface faded into the close, something that does not bode well for the bullish argument.

Today’s early action strengthened our belief that we would still see a pop into the New Year.  A Santa Claus rally typically happens within the last 5 days of trading, flowing into the first 2 in January. However, when the troops couldn’t muster a good close it had us a bit concerned that maybe it would be coal in the old stocking this year. While our spirits were dampened today, we still can’t help to believe we are continuing to set up for a pop. After today’s reversal even the most steadfast of traders are questioning their thesis.

Biotechs, retailers, semis and small caps showed some signs of life today giving credibility to the bullish camp however oil perked its nasty little head up sending those same bulls some mixed signals. Intraday breadth turned positive, but couldn’t hold and also limped into the close a bit bloodied.

Despite the negativity that abounds we still stand firm in our belief that Santa will arrive. We started nibbling some cast-aways today but have plenty of ammunition should our timing be off. Negativity like this creates bottoming action like we saw in October, should we turn up we’ll be ready. While it is always hard to sit up and wait for Santa, those caught sleeping may never see him come or go.

Our gut feel here is that a lot of potential buyers are waiting for someone to take the lead. They want other buyers to show their cards first and only after we see some signs of strength again will they be willing to buy.  Be ready for some action. The buyers are lurking and waiting and it won’t take much to get them running.  

Have a good evening.

RevShark