We're Not Buying It

From a technical perspective this is still very much a Bearish environment as distribution outweighs accumulation and price action remains well below its major averages. The gap made from Wednesday's rally will also get filled at some juncture.

From a tape-readers perspective the selling for the last few weeks has been so extreme that the market is just begging for a short squeeze rally.

But we're not changing our bias until we see heavy buying via a Follow Through Day. Only then will we consider buying.

Shorts Jump, But No Follow Through

A massive rally no-doubt has many short sellers running for cover. Volume on Wednesday's session just barely qualifies as accumulation from institutional players, but it won't be until next week that we begin to looking for accumulation as a Follow Through Day signal.

Follow Through Days occur after four days of a bottom and are marked by heavy buying with one of the major indexes up near 2%. This indicates that the buying is real and not just short covering.

Still a Bear

The Bulls don't have much to hang their hat on lately. Though the market is till up slightly for the week there has been little in the way of a sustainable rally.

In looking at price-action, it's usually emotional money that opens the day, and smart money that ends it. For most of the week sellers have dominated the closing hour of the exchanges.

If you're a Bull, you could only hope that the selling volume dries up and we begin to see institutional grade buying.

If you're a Bear, you jus twant to seit back and continue to watch it unravel.

We will hold our Bearish bias until the market tells us otherwise.

Fluff rather than conviction

The Bulls take center stage Tuesday, but lack of volume makes the move one of fluff rather than conviction.

If we continue to see this type of action it will only put the odds in favor of the sellers.

Bear keeps its grip

The Bear keeps its grip on things as another day of heavy distribution leaves its mark on the chart. Just as important as buying and selling is doing nothing! We won't change our bearish bias until we see high volume come in as a sign of institutional support for the Bull. We're also watching Technology leadership, which has cooled in the last couple of weeks. Any heavy selling there will be another sign of deterioration in the overall picture.

Melt-Up or Break-Down?

Just when we're all excited about a Follow Through Day, the broader market gets slammed with heavy distribution. It should go without saying that this market is still a tricky one. Will it be an end of the year melt-up? Or will the Bears finally get something to feed 0n? Nobody knows. But what we do know is that now is not the time to buy into the market.