Heavy volume hits the market hard with small caps taking the brunt of the selling. Energy and Materials led the S&P 500 lower as commodity prices continue to slide. Lends to the question if the economy were strong wouldn’t commodity prices be at least stable? Healthcare was hit hard to as the group was down nearly 1.8% on the session. Bonds held steady for a bit, but yields have moved more than 30bps since the last Fed meeting. As it stands now we are 5 distribution days in the last 4 weeks. Many will begin to panic and sell down holdings. The market has conditioned people to overreact on either side. Stay calm and sell when your exits are met. No need to overplay your hand. We still have an uptrend for now.

Isolate today and we get a very negative day. There is no question when the major market averages are down nearly 1.5% on heavy volume it should bring pause. Many are worried about a quarter point rate hike from the Fed a week from Christmas. Will Yellen be the Grinch who stole Christmas? It is anyone’s best guess at this point. At the moment the NASDAQ is hanging on its 10/23 gap. However, many will likely have stops in and around the gap so look for the market to go hunt down those stops. The 200 day moving average is not that far with it only being roughly 1% away. We will stay disciplined and work our exit signals while maintaining our strict money management practice.

Sentiment shifted once again to those who are neutral. AAII Bull ticked down to 34% while bears ended the week at 23. 43% of AAII respondents have no bias in one direction or another. Are they the smart ones? NAAIM active investment managers lightened up a bit on their long exposure, but not much to make a difference. The group still remains well under extreme levels in terms of long exposure.

It would not surprise us to see the market continue it selling a bit more here. Anything is possible. We should be able to adapt to any situation the market dictates to us.