Our pattern of gapping in the opposite direction of the prior day's close continued today, but this time the market was strong enough to push the S&P 500 through the 1200 level, which has been resistance for a couple weeks. Volume declined quite a bit, primarily due to some giant macro trade that hit at the close yesterday, so it was not a technical accumulation day. Breadth, however, was solid and the bulls held us steady all day.
After the initial gap up this morning, the market managed to get another leg higher on talk that the U.S. would provide aid for the European bailout. That was reported to be untrue by Dow Jones, but we held the gains and finished at about the same levels we hit at 12:00 p.m. EST.
While there were obviously some big point gains, it wasn't a day of crazy momentum. In fact, I don't see too many key stocks finishing at their highs, and many of the high-beta favorites such as NFLX, CSTR, BIDU and AMZN acted quite sedately.
The big question now is whether this pattern of suddenly reversing the prior day's close will continue. We are going to have some news overnight out of Europe as bailout discussions continue, so the risk is there. But the good thing about action like today's is that it creates a supply of underinvested dip buyers who are interested in jumping in on weakness.
I would have liked to see better volume today, but the ability of the S&P 500 to move back above 1200 is a positive. We should have some underlying support, and that is going to be very helpful as we encounter the positive seasonality that occurs in December.