Things are looking up this morning.
Europe has come back from Boxing Day with a nice 1.5% pop in Germany, Italy and France while the UK and Spain are up about 1% as well. 11,000 is the bull line on the Dax and 10,500 is the bear line – so we're bouncing around in-between at the moment, just as we are on the S&P between 2,000 and 2,100 and the Dow between 17,000 and 18,000.
On the whole, it's all just one big consolidation – but what are we consolidating for? None of your time should be spent looking at the index charts this week – not when the volume is less than half of what it is on normal days. Yesterday on SPY, for example, just 66M shares were traded and the average volume is 118M. That was the lowst full-day trading of the year and it followed Christmas Eve's 48M so the two days together barely added up to a "normal" day.
What you should, however, be concerned about is how FAKE the action was as it drove the McClellan Oscillator well into overbought territory. The McClellan Oscillator is a breadth indicator derived from Net Advances, which is the number of advancing issues less the number of declining issues. It's a momentum indicator, similar to MACD that gives us an idea of whether or not a rally is broad-based enough to be sustained and, clearly, this one isn't.
What we have going on at the moment is good, old-fashioned window-dressing – aimed at painiting a picture of 2015 that will be sold to potential investors in 2016. The brokers need you to put your money in the market so they can charge you fees – that's how the game is played and it really helps their sales pitch if the market wasn't negative the year before so all stops are pulled out to get us green at the end of the year.