The major averages had pared losses on reports President Obama was offering a scaled back budget proposal at a meeting with Congressional leaders, then the major averages closed near session lows amid uncertainty lawmakers will reach a deal to avoid the fiscal cliff.  The scheduled tax increases and spending cuts that go into effect January 1st are widely expected to slow the economy.

On the economic front, a report showed activity in the Midwest expanded more-than-expected in December. Pending home sales increased +1.7% in November to its highest level since April 2010.

The 10-year note was up 3/8 of a point to yield 1.69%.

Technically, the market (M criteria) has entered another "correction" as the Dow Jones Industrial Average and Nasdaq Composite Index both undercut their respective 50-day moving average (DMA) and 200 DMA lines, and the benchmark S&P 500 Index violated its 50 DMA line. The damaging losses prompt investors to avoid new buying efforts until a new confirmed rally with follow-though day, and meanwhile have a bias toward reducing exposure in stocks. Each individual holding should be closely monitored for any signs of technical deterioration.

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PICTURED: The benchmark S&P 500 Index undercut its 50-day moving average (DMA) line and finished -4.9% off its 2012 high, slumping toward its 200 DMA line.

Often, when a leading stock is setting up to breakout of a solid base it is highlighted in CANSLIM.net's Mid-Day Breakouts Report. Sometimes stocks are highlighted shortly after a technical breakout, yet while the potential buy candidate may still be considered action-worthy. The most relevant factors are noted in the report which alerts prudent CANSLIM oriented investors to place the issue in their watch list. After doing any necessary backup research, the investor is prepared to act after the stock triggers a technical buy signal (breaks above its pivot point on more than +50% average turnover) but before it gets too extended from a sound base. In the event the stock fails to trigger a technical buy signal and its price declines then it will simply be removed from the watch list. Disciplined investors know to buy as near as possible to the pivot point and avoid chasing stocks after they have rallied more than +5% above their pivot point. It is crucial to always limit losses whenever any stock heads the wrong direction, and disciplined investors sell if a struggling stock ever falls more than -7% from their purchase price.