Dazed and Confused

Yesterday traders were frustrated as numerous breakouts from the day before failed and the tech sectors, which had been leading since October underperformed. Meanwhile, small caps represented by the Russell 2000 showed some life as the index touched a new high before pulling back slightly and the S&P 500 broke to a new high. It was a very mixed and frustrating day for a lot of people. Adding to the confusion is the fact that our scans over the past couple of days have been turning up virtually a handful of poor set ups. Today's scans were of even poorer quality and turned up nothing we would trust. Frankly we are hesitant to make any conclusions about what message these mixed signals are telling us. The last two weeks in the year are traditionally strong as funds try to gun their performance measures and expectations for a Santa rally causes people to come off the sidelines to participate creating a self-fulfilling prophecy. This year could of course be different as the market never guarantees anything, but we sure wouldn't bet against a year end run. Likewise, we never wish to force a trade when there are no clear advantages. Right now there are no clear advantages and we have little choice but to wait this out. It is very likely that other market participants are just as confused as we are right now and this confusion is causing the mixed readings we are seeing.