Today was one of the days in which the indices are very deceptive. It looked like we had some flat action at the close because not much happened. But the story is quite different if you look at the intraday action.
The day started with gap up to a new two-year high on the S&P 500 due to the agreement on taxes. That, however, was then greeted with steady selling. It appeared that we had a chance to regain our footing when President Obama started his press conference, but the longer he spoke, the more he made it clear that, although he agreed to the deal, he didn't like it very much and the market sold off into the close.
An intraday reversal at the highs when we are extended isn't the end of the world. In fact it is pretty logical. We are in need of some consolidation after the recent run, and once the S&P 500 finally broke to a new high, the buying pressure that was so intent on doing just that dried up. We used up a lot of buying power when we pushed to new highs, and now the bulls need to regroup before they can make another run.
The uptrend is still in place and there is no reason to suddenly turn into a growling grizzly -- but taking some gains and being patient at this point isn't a bad idea. It wouldn't be at all surprising to see a little more downside in the near term, but we have plenty of underlying support to cushion us.
Though many bears are hopeful, it is very unlikely that this market will suddenly reverse course and head straight down. The dip buyers are going to be lurking and there are plenty of folks who will be looking for some end-of-the-year trading to pad their returns.