This time of the year its hard to get any volume whatsoever and that typically facilitates the Santa Claus rally that encompasses the last 5 days of December and first 2 days of the New Year. This is day two of that rally and so far it isn't a rally at all. Looks like the buyers went on vacation just as I did. More seriously the issue is that it's hard for anyone to do much in front of the end of the year and with the fiscal cliff talks all talk and no action. Few are willing to stick their necks out as a result. Then you get a retail report that worries investors that consumers are holding back as well due to the same uncertainty and it doesn't take much to get a decent retrace underway.

I am not so sure that Santa will stay absent the remainder of the rally period. At the same time, it isn't clear that the Senate and House will agree to anything but there's always hope and just as the bulls don't want to do much in the way of sticking their necks out, I am sure the bears feel very much the same. So we end up with a market that just drifts lower or higher.

Technically it is hard to be bearish in my opinion and that's even with all the uncertainty. I see one sector after another breaking out and fast money flows to it. Once it's done, they move to another. I see the small caps leading and that's typically what you see when a Santa Clauss rally is getting underway. The market breadth isn't bad at all either and we have had really good and positive action off the lows of November so hard to lean bearish here. In fact, its dangerous to do so.