Last week we made a tactical decision to step aside and not publish a short-term portfolio. In our view the cross currents in the news-driven situation did not give us an 'edge.' The timing turned out to be excellent. The market put in a head fake for the bulls and corrected more than 4%.

This week, we are still not interested in buying the dip. Why? The major indices are testing the up-gap that occurred at the end of November. Such moments of enthusiasm are almost always revisited when the market is no longer surprised. The purpose is to check for a consensus among buyers and sellers. If sellers do not rush in around that area, then the breakout is assumed to be a valid move and less emotional buyers will step in.

Bulls and bears are evenly matched at this time, which means rallies are being sold and dips are being bought on a short-term basis. This is options expiration week, however, which often means that stocks get pinned to strike prices and do not move for a few days.