The bulls had a weak dollar again today following the G-20 economic meeting, which caused the indices to gap up, but we were unable to gain further momentum. We churned most of the day and ended up with a weak close. Breadth was solidly positive, with about 3,400 gainers to 2,250 decliners, and oil, gold and commodities led. Financials were the sore spot, but there was some good momentum once again in select technology names. It was a narrower group of hot stocks, but there was enough strength to keep sentiment generally upbeat.
Our inability to gain additional upside lately is a function of market players starting to wonder if we have already priced in the main positives. We are widely anticipating gridlock following the election and the start of a quantitative-easing program next week. Both topics have been well discussed, and no one seriously doubts that they will occur. When events are that well anticipated for so long, it is hard not to expect some sort of sell-the-news reaction. The problem is that when everyone is already expecting a sell-the-news reaction, some market players are going to try to beat the rush by selling before the actual news events. In other words, we have to watch for selling in anticipation of the selling.
The biggest positive for the bulls today was that the dollar was weak again. The dollar closed near the highs of the day, which is why the indices closed at the lows. The dollar has provided great support for this market for months now, but we are sensitized to it and that is going to be a problem when it does bounce.
We are still solidly in the uptrend that started 9/1/10, but the weak close and the low volume make this market look tired. With next week's catalysts already so well anticipated, further upside is unlikely to come easily. On the other hand, this market still hasn't done anything wrong, so we don't want to be overly bearish at this point.