Since December 20th, stocks have been rallying.... the Santa Clause rally. On Friday we had a stagnant lunchtime followed by a late session ramp. The SPY rose from $126 to $126.60 in mere minutes on a day when market movements were muted.
Today we had the same type of doldrums. A pop after the open, and then stocks just hung in a tight range. I was almost expecting another big pop by the powers that be, but it didn't happen. Stocks faded into the close. What can we expect tomorrow?
The only big even is the Italian bond auction, that could be a market mover.
What has me leaning on the bearish side is currencies and the Vix point toward lower stock prices, yet stocks contniued to hold their grounds. We've seen this since last week. Stocks have been decoupling from currencies and the VIX to a degree. I think the lighter volume has something to so with this. The Fed isn't accustomed to manipulating the market with less participants.
Stock futures are already down .30% , but that can all change quickly. If the Euro can break $1.30, the AUD/USD parity, then we could see a pull back. Right now stocks seem to want to go higher on light volume and I would not be surprised to see the market gap a good .5% to .75% higher. Being a holder of puts, I would be very happy with the opposite, but since 2008/2009 the bulls have a way of ramping the markets even amid the worst of conditions.
Tomorrow volume should be light and market gyrations kept to a minimum. I think a pull back to $126 on the SPY is a distinct possibility.