A better than expected release of Advanced Retail Sales figures did very little keeping the market from heading lower for the third straight session. The Dow Jones Industrial Average lost another 103 points on the day as it set a new low for the Month of December. After the mid-day low a strong rally had taken place and it appeared as if we had set a short-term low. However, the final hour of trading sellers regained control and pushed the market back to just above the session lows. Volume ended the day mixed with volume rising on the NYSE yet falling on the NASDAQ. This market simply does not want to move higher just yet. Santa Claus remains on the sides and our hedges and neutral position will remain in place.
Up until the final hour of trading it did appear the market had found a short-term low. Volume was favorable and the move off the lows and support levels were favorable for a market to find a short-term low. Despite 52 week lows outpacing 52 week highs on the S&P 500 prior to 3pm we were expecting the bullishness to continue. The number of stocks above their respective 20 day moving average is at levels where the market does find lows. Not to mention short-term oscillators are at levels were a bounce may occur. We’ll continue to pay attention to our indicators and wait for the market to show favorable odds for the long side.
Sentiment once again clocked in on the bullish side. The number of AAII bulls remains above 40 while the number of bears remains below 30%. Perhaps after this recent sell off we’ll see a shift to the bear camp. Even the NAAIM sentiment survey went above 100 once again despite the selling early this week. We have seen this situation for much of this year with the number of bulls nearing extreme levels, but never getting extreme. Now, given the recent sell off we’ll see if this situation has caused those who have been bullish and neutral to the bear side.
Tomorrow we’ll get a read on PPI a reading into inflation. Despite a jump in retail sales import prices showed declines. Inflation continues to remain tame and likely gives the Federal Reserve an excuse to keep pumping liquidity.
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