Seasonality is a market tendency, and not a certainty, but the Monday following Thanksgiving is typically weak and that is what happened. With the indexes technically extended, conditions were ripe for selling. Stronger-than-anticipated Purchasing Managers' Index numbers from China created some early strength, but that faded quickly. While the indexes did not suffer massive losses, the day saw the worst performance for the S&P 500 since Oct. 8.
Breadth was poor, with around 1,900 gainers to over 5,550 losers. High momentum names and some of recent winners were hit the hardest as traders moved quickly to protect gains.
While it was an unpleasant day for the bulls, it was technically healthy to kill off some of the recent excesses. The market has been amazingly lopsided for a while with all selling being of very short duration.
What has been driving this market has been an increase in the Fed balance sheet of $293 billion plus constant claims and news headlines that a "phase one" China trade deal is coming soon. That combination has run over the bears, but it has left the indexes and many stocks without a healthy foundation. To put money to work has required some undisciplined chasing and that never works for long.
The S&P has been down three days in a row only once since early August and that pullback was quite mild. It will be interesting to see Tuesday if the bears can generate a little more downside momentum. There doesn't seem to be much worry or concern that this is the start of a major topping process, but the bears have an opportunity now to show that they are serious. But follow-through has been very hard for the pessimists.
The good news is that we need this sort of action for better charts and trading. The bad news is that we need to be patient and see how it develops from here.
Have a good evening. I'll see you Tuesday.
