Everything changed in December...
For months, the so-called "Smart Money" has been on-board with the incessant rally in US equity markets, buying every dip - no matter how shallow.
However, since the end of November, a very different regime appeared to take hold.
As a reminder, Bloomberg's SMART index is calculated by taking the action of the Dow in two time periods: the first 30 minutes and the close. The first 30 minutes represent emotional buying, driven by greed and fear of the crowd based on good and bad news. There is also a lot of buying on market orders and short covering at the opening. Smart money waits until the end and they very often test the market before by shorting heavily just to see how the market reacts. Then they move in the big way. These heavy hitters also have the best possible information available to them and they do have the edge on all the other market participants. To replicate this index, just start at any given day, subtract the price of the Dow at 10 AM from the previous day's close and add today's closing price. Whenever the Dow makes a high which is not confirmed by the SMFI there is trouble ahead.
What does this mean?
Simple - while the S&P 500 is up for the month, the average day sold off into the close, finishing below the day's open...
In fact, in December ALL of the S&P 500's gains have come from the overnight-session (+2.2%), while the day-session has lost 0.65%...
As FBN Securities' JC O'Hara notes, "Selling Pressure is increasing..."