Market Continues to Shrug

 | Dec 21, 2012 | 8:02 AM EST
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Does anyone know exactly what time the world is supposed to end today? I just wanted to know if it was during market hours or after the close.

The action on Thursday was pretty much more of the same. If you wanted to be bullish you would have to note that despite the fact that this year's market leader, Apple (AAPL), cannot get out of its own way, we've managed to rally. If you wanted to be bullish, you might note that gold, also a previous market leader, has collapsed of late, and while it has garnered attention, it certainly hasn't cause the ruckus it would normally cause in the market.

And heck if you wanted to be bullish, you might even say that as the days go on, it appears less likely we'll get a deal in Washington, and the market seems to shrug that off as well.

Yet, it is my experience that markets that shrug off bad news at the lows are bullish, markets that shrug off bad news after they have rallied tend to be more about complacency than a market that we congratulate for shrugging off bad news.

I still think that in such a situation, it tends to set up a sell-the-news situation more than anything else.

Yesterday I showed the 30-day moving average of the equity put/call ratio. It is still trending down (bullish) so we'll keep our eyes on that sentiment gauge. Another options ratio gauge, the ISE call/put ratio however has seen its moving average tick down. There will be those who say, but ticking down here or there didn't matter on the bearish side, and they would be correct. However, on balance, a peak in this indicator tends to mean a correction is not far away.

Elsewhere, I found it interesting that Nasdaq's 50-day moving average dipped below the 200-day moving average on Thursday, and no one seemed to notice. I grant you that such a situation typically occurs when the market is going down, not when it is a month into a rally, but that's what happened. I am a believer that it matters if the two moving average lines are heading in the same direction. In this case the 50-day is moving down while the 200-day is moving up, so I would be more apt to call it a kiss rather than a crossing.

I went back over the last decade and discovered one other time that this occurred. It was in the spring of 2005. We were about two weeks into the rally off the lows when the crossing took place. It was bullish back then. The main difference is that we were not trading so far above the crossing then as we are now. For now, any decline should find near-term support at those moving averages.

In the meantime, I am more concerned that the number of stocks making new highs has not expanded.

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volatility is quite low here, and we could see some downsides here in the short term. ...



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