The positive seasonality that the bulls enjoyed during Thanksgiving week ended with a thud on Monday. The Monday following Thanksgiving is typically a down day, and the odds played out very well for the bears.
The headlines will state that the reason for the poor action was the growing Covid crisis in China. But it was also worries about upcoming economic data, a Fed Chair Jerome Powell speech, and strong overhead technical resistance, that triggered the sharp drop in the indexes.
What was most notable about the action on Monday was that it was very correlated. There were very few pockets of strength. The Nasdaq 100 (QQQ) , for example, had 18 stocks that were up and 84 that were down. Overall market breadth was 1,600 advancers to about 6,650 decliners.
Market players focused on seasonality last week and ignored big-picture negatives, but they were forced to shift their attention back to macro-economic matters today, and there just isn't much that is positive. Fed member James Bullard made more hawkish comments, and there is a good likelihood that Powell may not relent in his hawkishness on Wednesday.
There isn't much news flow right now and what news we do have is not supportive of much optimism. That hasn't stopped the bulls that have been stubborn about a bullish narrative that is trying to promote a Fed pivot that will drive the market higher when combined with seasonality and poor positioning. We will see how well that holds up when confronted with some important economic data.
Have a good evening. I'll see you tomorrow.