(By Rich Bieglmeier) For the second day in a row, stocks struggled to find positive ground on Tuesday. The NASDAQ, Dow, and S&P finished slightly below water on eh volume. The lack of conviction from either bulls or bears is not that concerning, yet. However, at some point, and soon, bulls need to take charge or bears will.
The tenor of the day was tempered by comments from an analyst who says he is alarmed at how many democrats say they are willing to drive over the fiscal cliff. At the same time, Bank of America (BAC) CEO Brian Moynihan says the impact from nose-diving off the cliff will be felt into 2014.
Clearly, Wall Street and the Too Big to Fail banks are putting pressure on the D.C. crowd to do something, anything, to avoid that dreaded cliff. In late summer, Goldman Sachs wrote that it would take a 20% drop from the market's high to motivate Washington politicians.
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iStock see the NASDAQ's, Dow's and S&P's MACD lines starting to rollover. Meanwhile, the indexes' respective 50-day moving averages continue to fall and are starting to crowd current price levels. If traders on the buy side don't get it together soon, then the charts point to a round-trip to mid-November's lows.
In addition to the MACD line rounding off, momentum for the indexes is traveling a similar path. Another couple or red days, even pink, could move iStock's momentum model back into negative territory.
This morning's ADP Employment Report will give computer trading models ammunition to jump-start the day's trading one way or the other. It's the first non-Jobless Claims employment report that should include the full and final impact of Sandy. The economists polled say 125,000 new jobs were created in November. With initial claims spending much of the month above 400,000, iStock feels the odds favor a number below the consensus. The question is how bad and how much can be blamed on the Superstorm.
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If Wednesday's ADP report stinks and Thursday's Jobless Claims continue to hover near 400K, then traders will anticipate a bad Employment Situation Report on Friday. Obviously, the opposite is true if results are better than expected today and tomorrow.
For now, we are waiting to see if the NASDAQ can really break away from a lid at 3,000ish, the Dow at 13,000, and the S&P to run higher and away from 1,415. If they can, choo-choo, the bull train rides again. However, if current levels continue to restrain advances, bears will win out eventually.