It is lackluster action out there, with breadth running about 2200 gainers to 3600 decliners and 206 stocks at new 12-month lows versus 156 at new 12-month lows. Those are pretty dismal statistics, but the S&P 500 is down just 0.31% and DJIA has dropped a miniscule 0.20%.
There are some issues out there, but they aren't having much impact on the indices so far. The other big positive is that underlying support remains strong. As soon as some key technical level is challenged, the buyers show up. There has been no downside momentum in this market in so long that many have forgotten what it feels like.
When the market traded in a more natural manner, there were always traders that planned on buying dips -- but they would change their mind when we had actual weakness. The idea of buying a dip is always appealing, but it loses its luster when there is some actual risk that a pullback could gain some momentum. That never happens in the current market, so the dip buyers are always very confident.
This market action is worse than it looks, but the relative strength of the indices help to prevent sentiment from turning more negative and reassures those that are inclined to buy dips.
Sooner or later, the dip buyers will be trapped, but it is going to take an ugly close and then some lower lows to shake their confidence.
I admit I'm rooting for the bears to gain some traction. I believe that will make for a more interesting trading environment and would give us some better opportunities into the end of the year. The combination of strong indices and weak breadth is not giving us much new to trade. Either take this market down or broaden the strength instead of half measures.