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Good morning. With the S&P 500 up more than 3% year-to-date as of yesterday's close, it is easy to get a little complacent about the year. After all, the first five days of January were up, which is supposed to lead to an up January. And based on the old Wall Street saw, "As January goes, so goes the year," a gain in January portends well for the rest of the year. Yes, I know there are exceptions and a barrel full of flaws here, but unless stocks start to tank hard, January is looking like it will be up.

However, the problem is that anyone who might have been a little queasy about the fiscal cliff debate isn't enjoying all of the gains for the year. You see, if one decided to wait until it was clear that the professional politicians in Washington were not going to send the U.S. economy directly into recession to start the year, they are not up 3+% right now. And just about any disappointment from any number of issues including punk earnings, weaker than expected economic data, or new threats of brinkmanship in Washington could push the prudent investor into the red for the year.

The point is that if you missed the very first trading day of the year - and it was easy (if not smart) to do - you don't have much of a gain so far in 2013. In fact, since the close on January 2nd, the S&P has only managed to advance another 8 points, or about one-half of one percent.

As I've been pointing out in recent reports, the bears have been active on an intraday basis during most sessions in 2013 as there have been at least a couple intense sell programs run each day. I'm still not exactly sure why these programs are run as they don't necessarily correlate with the release of any news or rumors. As such, I have no choice to assume that there are still folks with big piles of cash betting on the dark side whenever stocks start to advance these days.

I can also understand why some traders might be leaning toward the dark side these days. The earnings season isn't expected to be stellar, the consumer was clearly bothered by the fiscal cliff debate, the budget/debt ceiling battle is upon us already, and the economy isn't exactly humming along. And with some members of the Fed looking to pull the punch bowl asap, well, rates might become a problem for stocks at some point.

Yet at the same time, the market hasn't succumbed to the intraday negativity. While it has certainly been a struggle, stocks have managed to advance a bit since the Jan. 2 blast started the year. The bears will argue that the buying seen keeping the indices afloat right now is simply due to new money flows as mutual fund managers traditionally put new cash to work at the start of the year. The argument continues that when the new money runs out, so too will the bulls' grip on the indices.

But I believe there is at least one other way to look at the action right now. While there has indeed been a steady stream of sell programs each day and enough buying to counteract the bearish algos, the intraday volatility hasn't been terribly high. Although I don't spend much time with the VIX, it is also interesting to note that it is near a multi-year low at the present time. So, since neither team has been overly successful since the opening blast this year, I'm going to opine that traders might be waiting on the next theme to develop before getting aggressive one way or another.

Let's not forget that there has been a dearth of inputs for traders to work with of late. The earnings season is warming up in the bullpen and there has been next to no economic data in what seems like days. But this quiet period is about to end. Soon the earnings parade will really start to roll and we will get some data worth reviewing very shortly.

So, at this stage, I believe that traders are biding their time waiting for the next theme to develop. As such, we need to stay alert to any and all data in the coming days and also pay close attention to the market reaction. Remember, it's not the news that matters, but rather how the market reacts to the news. And a big reaction one way or the other should give us a clue as to the next theme or trade that could take hold.

Turning to this morning ... The report that Fitch would put the U.S. credit rating under review if the debt ceiling debate is not resolved in a "timely fashion" has put stock futures on the defensive over the past hour. And with both sides already having put down roots on their positions in this debate, it looks like we could be in for another nasty fight in Washington. In short, stocks are unlikely to fare well should this occur.

Pre-Game Indicators
Here are the Pre-Market indicators we review each morning before the opening bell ...
Major Foreign Markets:
- Shanghai: +0.60%
- Hong Kong: -0.14%
- Japan: +0.72
- France: -0.20%
- Germany: -0.52%
- Italy: +0.17%
- Spain: -1.00%
- London: -0.01%
Crude Oil Futures: -$0.43 to $93.71
Gold: +$8.50 to $1677.90
Dollar: higher against the yen, euro, and pound
10-Year Bond Yield: Currently trading at 1.830%
Stock Futures Ahead of Open in U.S. (relative to fair value):
- S&P 500: -6.78
- Dow Jones Industrial Average: -52
- NASDAQ Composite: -9.15
Thought For The Day ...

We do not quit playing because we grow old, we grow old because we quit playing.-Oliver Wendell Holmes

Positions in stocks mentioned: none
Source: Daily State Of The Markets: Waiting On The Next Theme To Develop