I'm maintaining a bullish bias, but I'm skeptical that one bad morning is all it will take to price in concerns about Italy.
There's decent buying support, but there's also enough uncertainty for one sharp dip to conclude the whole matter. The fact that we have buying support helps set the stage for more Europe-is-saved rallies, but it is premature to anticipate that happening today.
One thing I've found constructive about the market action lately is that we are seeing a more natural ebb and flow. We are going up and down, as you'd expect when human emotions are involved. It's easy to get caught leaning the wrong way on a day like this, but it makes me more optimistic that we'll have better trading into the end of the year.
We are starting to roll over again as I'm writing this, and I would not be at all surprised to see a weak finish. The problem is that there is no immediate catalyst for a Europe-is-saved rally. There are no meetings on the agenda and no announcements pending. We will see something eventually, and I'm sure we'll jump euphorically on the news, but for now the bears have the ball and I'm looking for them to press a bit more.
Some market players are concerned that this is the end of the uptrend in place since early October. While that is a possibility, I still believe that the combination of underinvested bulls, the need for performance and positive seasonality should help to hold the market up into year-end.
If we start taking out some key support levels I'll change course, but we have a ways to go before that becomes an issue.