Equity rally slows to a crawl

Good day! The market has been waiting anxiously it seems for a firm decision on whether or not an extension of the Bush-era tax cuts and unemployment benefits will pass. The consensus is that they will, but it has been met by fierce resistance, particularly from House Democrats. On Monday, it managed to gain support by Congress and will head to a final vote in the Senate mid-week and the House of Representatives by the end of the week.

Dow Jones Industrial Average

The bulls have been in charge over the past several weeks after catching their breath in November, but the pace has slowed in the last week and the market struggled once again on Monday morning. The indices had rallied in premarket trade and were extended by the time the opening bell rang, as I pointed out in yesterday's column. This made it difficult for the trend to continue to push higher on Monday.

The bulls did hold on throughout most of the session, but by mid-afternoon the S&P 500 had been trading above its 15 minute 20 period moving average for about three days. It's exceptionally rare for an index to make it past the third day and still remain above this key technical level. Thus, despite an attempt to break higher into the mid-afternoon, risk for new positions by the bulls was quite high in the indices. The Dow Jones Ind. Average did manage a successful move from a scalping to daytrading standpoint, but the bull trap is obvious on a 5 minute chart of the S&P 500. The Nasdaq didn't even try. The larger corrective bias finally took over into the final hour of trade and wiped out the session's gains to leave the S&P 500 virtually flat by the closing bell.

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