The market slumped to a loss Wednesday, unable to continue higher after two impressive days to start to the week. The S&P hit its high of the day pre-market at$145.58, but faded right off the open. Stocks looked like they might bounce off the lows in the last hour of trading, but instead accelerated into the close. Today's action alone isn't enough to negate the bullish sentiment created in the last two days, but we will be watching closely to see what it leads to. The fiscal cliff continues to be the catalyst as today the GOP saw its budget deal rejected.
If the market can limit the damage tomorrow, this will feel like nothing more than healthy digestion. With the outcome of the fiscal cliff negotiations still very uncertain, it makes since that we chop around a bit. If you put on shorts after the potent two-day rally, I believe you could have used today's weakness to cover some and add to long positions in stocks showing relative strength. I still think we will have a bullish tone into year-end.
Banks, which have been on a tear, took the day off today. Goldman Sachs (NYSE:GS) went from around $120 to $129.30 in three days, so a rest was due. Bank of America (NYSE:BAC) put in a bit of a topping candlestick, but after its massive run that's not surprising. Citigroup (NYSE:C) held up best, dropping only a penny on the day.
There were not many standouts today in general, and we could see volatility drain further out of this market over the next two weeks. Oracle (NASDAQ:ORCL) had a very strong report and the market didn’t “sell the news,” which is another bullish sign. Most strong stocks held onto the majority of their gains from the past few days.
Apple (NASDAQ:AAPL) couldn't put in a third strong day after its Red Dog Reversal as it finished down 1.4%. Given the potency of the two-day move, it's natural to see AAPL rest a bit. The macro picture still looks a bit bearish in AAPL though, so it will important to see how well it holds up.
*DISCLOSURES: Scott Redler is long LVS, BAC. Short SPY.