NYSE Posts Second Day of Distribution as Reid Signals Congress Still Can’t Get its Act Together

For the second day in a row the Dow Jones Industrial Average, S&P 500, and the NYSE Composite posted another day of distribution. It is an ominous sign for a newly developed rally to post back to back days of distribution after a follow-through day. Positive economic news from Durable goods to housing did very little to help this market today. Sellers jumped aboard just before the 10am hour, but were held back by another intraday rally like Monday’s session. It appeared as if the NASDAQ and others were ready to bolt to higher ground before Harry Reid and Mitch McConnel spoke about the Fiscal Cliff talks. The market couldn’t rebound and ended near the lows of the session as volume jumped. This rally has a negative tint to it and the next move on volume will spell out the direction we’ll head in the short-term. Friday’s supposed follow-through day kicked off a new rally and the one thing you do not want to see is distribution within the first few days after the follow-through day. Unfortunately for this new rally is we have had back-to-back days of distribution. Monday’s intraday action was bullish, but still put the NYSE composite, S&P 500, and Dow into distribution camp. Today’s action was clear distribution and is not questionable. Distribution following a new confirmed market rally spells trouble for the rally attempt. I’d expect to see this rally fail shortly and we’ll be on the hunt for a new uptrend. If we move higher on strong move we’ll change our tune, but for now distribution is spelling trouble for this rally attempt. Financials rolled over today with the XLF rejected at its 50 day moving average. Retail (XRT) still is having trouble with its 50 day moving average despite the media’s attention on how good Black Friday sales were. Oil and Gas was the biggest drag on the S&P 500 followed by financials. A sign the market is on shaky ground is from the only sector higher on the session being the Utilities. If we don’t see the market improve here look for utilities to show strength while the rest of the market heads lower. If you jumped into the market yesterday or today remember to have an exit strategy. It will mean the difference when it comes down to your returns! Buying is the easy part.

Stocks End Recoup Some of Monday’s Losses; Volume Mixed

The markets did their best to rebound from Monday’s sell off, but fell short. Volume ended mixed on the day with the NYSE volume coming in lower and the NASDAQ coming in better than Monday’s levels. Economic data was disappointing with Consumer Confidence and the Richmond Fed disappointed with lower than expected readings. Case-Shiller report on housing was better than expected, but still showed housing prices fell overall. Today’s market closed was a bit disappointing as the major indexes clsoed off their highs. While today’s green close is a step in the right direction there is much more work to be had if this market wants to rebound. Angela Merkel’s debt sharing comments did send stocks immediately lower, but the market was able to rebound and push higher. Perhaps mutual funds looking to deploy cash for month end reporting had something to do with the move, but anything is possible. The action today was very much like Friday’s market action trying to recover from prior day losses. We remain in sell mode despite the rally today. Tomorrow we get durable goods figures at 830 followed by pending home sales at 10am. However, market pundits will likely look to Thursday’s arrival for first quarter annualized GDP figures. The market is looking for growth of 1.9%. Our economy is not humming along as it should and worse of all we are bumping up against the business cycle. Every 4-6 years the economy enters into a slowdown and by all indications our economy is about to enter into one. Any disappointment should usher in lower equity prices, but we’ll simply follow where the market will take us. Who knows? A very negative number could usher in a new round of quantitative easing! In the end price matters and rules above all else. Price destruction going on with European stock indexes is quite extraordinary. Germany, Spain, and Italy are three looking mighty vulnerable at the moment. All three remain in downtrends and especially scary is the German DAX index. The Germans are the ones holding up the Euro and with the weakness in their stock market certainly speaks volumes. Europe will drive a lot of the conversation and certainly will weigh on the minds of traders globally. Cut those losses short and enjoy the ride.