Yesterday, eight of the eleven sectors finished lower as the holiday joy is fading quickly.

Right now, the S&P 500 is pulling back from a double-top formation. It has to make a stand soon.

The sobering process continues, as shown on the Fear and Greed Index; ‘extreme greed’ eases to just plain ‘old greed.’

Santa Stumbles

It started nicely, but the calendar turn didn’t work well for the Santa Claus Rally. Technically, the rally is defined by the performance of the S&P 500 in the last five days of a calendar year and the next two sessions of the following year.

This time around, it was -0.9%.

This is more of a curiosity than a hardcore signal for the market. Tom McClellan of the McClellan Market Report posted a great chart showing that the market rallied when Santa Claus delivered and also when it went down.

January Barometer

The next signal for the market will be the January Effect, which is essentially the notion that as January goes, so goes the rest of the year.

But historically, January struggles when Santa comes up short.

ISM Manufacturing

This bombshell report didn’t get the attention it warranted. Even the ‘good news’ part of the report (prices paid) might be coming down too fast, signaling disinflation that could morph into deflation.

New orders have been in contraction for 16 straight months – a feat strongly associated with a recession.

Portfolio Approach

We close two profitable positions yesterday in the Hotline model portfolio.

Today’s Session

Bond yields have begun to edge higher and that’s a little unnerving. But, this is not entirely surprising considering how swiftly they retreated in the first place.

I’d like to see 4.0% hold as an impenetrable resistance point for the ten-year treasury note.

Part of this morning’s push higher is the reaction to initial jobless claims coming in better-than-expected.

202,000 versus consensus of 216,000 initial jobless claims, slipping to the lowest level in three months.

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