Monday’s Pullback was Fast and Furious

Monday brought the corrective move we’ve been waiting for. After last weeks of narrow range consolidation the market was very wound up and overbought. Today an expansive downside move came in across the broader markets on high volume leaving a distribution day. The market’s complacency and bullishness hit all time new highs last week (with the low on the VIX), so the pullback came in fast and furious. That is normal when the market has been one sided for so long.

Crude rallied up $1.08 to close at $60.32, now that December is nearing the OPEC meeting is becoming a concern. Another cut in production is being rumored from the Saudi oil minister. Gold also rallied today to close up $11.60 at $640.60. Dollar weakness helped push gold up today to fuel the flight to safety thinking.

What took eight days to gain was all given back in one drop….today! Which on the onset seems extreme, but it really is not. Last week we were marking time (means marching in place) and that was due to the holidays and light volume. So take that away and we didn’t see a lot of gain last week and this drop doesn’t seem as bad. Plus it was an orderly pullback and a much needed drop. The over reaction only seems extreme because we haven’t seen many —54 days on the Nas lately or —158 on the Dow. But lets not forget we’ve seen that UP, so just because it is red isn’t the end of the world…or the bulls world.

So what do we do now? Well there is a lot of data due this week, all of which can turn the tone quickly and change this market. The swing lows are still intact and we aren’t even that close to them, so we do have some room to move still for correction before bullish anxiety would set in this market. We’ve gone UP since July, so a pullback is not a bad thing. Look for a tighter range Tuesday to help digest this expanded move and for spurts of volatility. Which means there should be many periods of chop to contend with intraday.

I think we can take out Monday’s lows and then find some buyers as a very possible setup into Tuesday. Unless the data is just horrific I don’t see the market closing under Monday’s lows, just dropping, testing and then some upside. So early on I’ll look for down move unless the data is stunning and rallies us pre market, which would probably be sold off then look for some rebound. But I think this could be pretty in line data and let the market correct more than bounce. Watch those swing lows on the daily charts below for the BIG picture and a turn in trend.

Economic Data for the Week of November 27 — December 1:
Tuesday 08:30 Durable Orders, 10:00 Consumer Confidence, 10:00 Existing Home Sales, Wednesday 08:30 GDP Prel., 08:30 Chain Deflator-Prel., 10:00 New Home Sales, 10:30 Crude Inventories, 14:00 Fed’s Beige Book, Thursday 08:30 Initial Claims, 8:30 Personal Income, 08:30 Personal Spending, 10:00 Chicago PMI, 10:00 Help Wanted Index, Friday 00:00 Auto Sales, 00:00 Truck Sales, 10:00 Construction Spending, 10:00 ISM Index.

Some earnings for the week: Tuesday pre market — JTX, SKIL and after the close ARO, LNUX. Wednesday pre market DSW, TIF and after the bell CHS, SNPS and TIVO. Thursday pre market DLM, DG, HNZ, and after the bell HRB, ISLE, OVTI, UNCA. Friday pre market WMG.

ES (S&P 500 e-mini) Tuesday’s pivot is 1389.75, weekly pivot is 1404.50. Biggest volume of the December contract traded today. Intra day Support: 1383, 1379.75, 1376, 1373.75 and 1365.5. Resistance: 1386.75, 1388.50, 1393.50, 1397, 1401, 1405.25. Daily chart is below.

Compx (Nasdaq composite) closed -54.34 at 2405.92. Support: 2392.01, 2374.27, 2360.88, 2349, and 2340.79 50dma. Resistance: 2429.78, 2444.53, 2455.04 and 2468.42.

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