What was most notable about the action today was that volume was the lightest of the year. Technically, it is a good sign when volume contracts on a day of profit-taking, but it is worrisome that there is such a high level of disinterest. The lowest volume of the year should occur in August when folks are on vacation, not in the middle of November when it is time to consider positive seasonality and end-of-the-year positioning.
Low volume has plagued this market since June 2009, and hasn't been a very good indicator of market direction. Nonetheless it is symptomatic of the fact that individual investors are becoming even more disenchanted with action that seldom feels very natural.
Ironically, it does seem lately that we are not being pushed around as aggressively by the high-frequency and computerized trading. The light-volume pullback today is textbook action. It is exactly what you'd look for after the bounce last week. We had a good sell-the-news setup on the news out of Italy, and we also have some technical overhead not far away. A pullback here is unsurprising and probably healthy.
If things continue to play out in the usual fashion, we should have another day or two of consolidation and then a run at the highs over 1275 or so. The longer we consolidate now, the better the setup will be for the bulls.
The bears continue to worry about the headline news out of Europe and the health of the domestic economy, but this wall of worry has served the bulls well lately. As long as we have obvious negatives, there is idle cash out there to support the market.