Yesterday's intraday trade was directionless and nearly impossible to trade with any conviction. That is to be expected on the second lowest volume day of the year. Why such low volume? My guess is that investors are extremely unsure of what to expect over the next few weeks so decided to sit yesterday's session out and wait for more headlines. See the NYSE volume on the chart here:
Also note the declining volume that has accompanied the rally off the October lows:
The S&P 500 finds itself in a narrowing trading range that should resolve in either direction over the coming weeks:
Will we get a Santa Claus rally or an ugly sell-off in the near future. We will be waiting patiently for just throwing out trades blindly in this tape is a killer. This is a tough market to trade to say the least. Headline risk coming out of Europe is still massive. We will continue to keep position size small if and when opportunities arise.
Banks were the major laggards yesterday and are again acting their part so far in the European trading session today. Note the wedge forming in the BKX bank index. A break below support and the 50 day moving average and the lower line of the wedge spells lower prices, a break out of the wedge and especially above the 100 day moving average might cause a broader market rally.
All in all we remain careful, very light on positions, 95% cash level, and waiting for better setups.