So when is a sleepy day a good one? Hard to argue that today wasn’t good for the markets, although it seems as if the market could use a long vacation to the down side. It would surely set things up better for all of us and allow it to once again get aggressive to the long side. As long as this market refuses to fall very much it won’t allow us to get too aggressive because of the extreme risk involved that could cause this market to snap down at any time. You sure don’t want to be too involved when it does occur.

Today the market was incredibly boring from a point movement perspective, but it really was pretty healthy overall action as we held all of the gains we made from yesterday. There is no argument to the contrary. The bears can not spin doctor this type of action. Strong up days in to resistance one day, and then holding all those gains the next day, suggests further upside action in the short-term. Although, again, I am not excited about getting too involved here.

We started the day out lower, but that wiped away rather rapidly. The majority of the day was spent at the flat line across the board. Volume contracted on the stocks that were up big yesterday and printing inside bullish sticks today. The candles were near the top end of the candles printed yesterday on lower volume, and that, too, is a bullish sign for the market. Strange really. When will this stop! We play it until it does, I guess. Bottom line is today was solid for the bulls even though we went nowhere.

Earnings continue to be quite good overall with the occasional blow ups, of course. After hours we have strong earnings from Yum! Brands, Inc. (YUM), and Green Mountain Coffee Roasters Inc. (GMCR), but not so great from Visa, Inc. (V), who is already weak. Government intervention has really hurt them. However, I am keeping track of the earnings reports and the good ones clearly outweigh the bad ones.

This is making it tougher on the bears as more and more charts are turning favorable on big volume based on those reports. Less and less areas for the bears to run to make an effort to get things lower on a more consistent basis. The good earnings are coming from all areas of the market. Sector by sector is participating, and that is important as it makes it harder for the bears to focus on one area to kill the market off, such as they did when the financials were in terrible shape technically.

They went there day after day to keep the bulls at bay. When a sector such as the financials are getting crushed almost on a daily basis, the market struggles to get a bid elsewhere. Too important a sector to have in bad shape, but that’s no longer the case, and for now, there really isn’t too many places sector to sector for the bears to make their attempts to bring things down day after day. The earnings season has thus far been a friend to the bulls.

There are two big reports out over the next two days. Tomorrow we have same store sales and that is huge for the retail sector. It’ll affect the entire market. The market wants to see that things didn’t suddenly cool off, and that the consumer will spend, even after the Christmas season has come to an end. On Friday we get the big Jobs Report. The market wants to see if the jobs numbers improved by well over one hundred thousand.

The ADP report today was better than expected, thus, the report is more pressured to come through. The ADP report has been inconsistent in terms of foretelling what’s coming two days later, but the numbers are out there, and now so are the expectations. With the market so frothy it’s not a great thing to disappoint now. The market won’t be short of catalysts over the next two days.

Sentiment is on the improve, although it’s still a tiny headache. Not nearly as big a headache as some weeks back as the bull-bear spread fell by six percent week to week. Down to 30.7% from 36.7% the prior week. It would be great to get those numbers down to the mid 20’s, but it sure does feel better to see the spread move down to near 30%, and down 6% for the week. With fed Bernanke printing daily it’s nearly as relevant an issue for this market right now.

I guess fewer and fewer believe in this market as it goes higher and, of course, the bulls love this stuff. Again, 30.7% is not a great spread, but it has moved down from nearly 40% some weeks back. The bulls should feel relieved. The trend remains higher based on the feds actions for now.

Peace,

Jack