Distribution hit the market today as the major market indexes finally close below their respective 10 day moving averages. Higher volume across the board indicated many were looking adjust portfolios heading into the weekend. Distribution does happen and we expect it as part of an uptrend. What we do not want to see is distribution pile up over the next week or so. One day is no need to panic, but given how far this market has come since the election a pullback is not out of the question. We continue to see exit signals hit as we shed laggards and hang onto our winners. As always we will cut our losses and continue to seek out new long signals. Obey those exit signals and maintain a strict discipline with your trading rules.

Sentiment continues to be skewed towards the bulls. NAAIM exposure index shows active managers are heavily exposed to equities. It would not surprise us to see the market continue to chop around with so many active managers heavily exposed to equities. AAII bulls continue to remain in the 40s with Bulls ending this week at 45%. We have yet to see extreme bullish readings. Bears remain under 30% ending the week at 29%. Until we see volatility pick up do not expect sentiment readings to change drastically.

The VIX index continues to remain near yearly lows as many investors are expecting future volatility to remain low. Heading into year-end it will be interesting to see how volatility reacts. Will investors change their behavior? Time will tell. For now, the low volatility does not bode well for explosive gains. Much like we saw in late summer a slow melt higher may once again be in the cards.

Five more trading sessions left in the year. One thing we can look forward to in January is certainly the January effect. Many stocks that have been extremely oversold run wild as we return in the New Year. Our morning watch list and chat room will certainly be on the lookout for these stocks. They can run for a day or for a few days. Most of them are junk, but we are not going to give up on potential gains. Be sure to sign up for a Platinum Membership and kick ass in January!