No Meaningful Rally Until We See This Pattern – Be Patient

TAKE THE 1 WEEK FREE TRIAL FOR INVESTORS AND FOLLOW OUR TRADES Posted 9:00 AM ET - Last week the market fell below the 200-day and the 100-day moving averages. The selling pressure was relatively heavy and stocks closed on the low of the week. We are getting a small bounce this morning, but it will quickly falter. The downside needs to be tested before we get a meaningful rally. Asset Managers are not worried that they will miss a year-end rally and they have pulled bids. The downward momentum has been established and there is nothing to stand in the way. Strong economic releases would save the day, but the calendar is light. Retailers will be posting this week and the results have been dismal. Towards the end of the week, Thanksgiving will start to impact trading volumes. We are likely to stabilize and flat line into the jobs report (December 4th). That will spark some activity, but we will remain in a holding pattern until the FOMC on December 16th. My forecast sets us up for a nice opportunity to sell out of the money bullish put spreads. The market will hit an air-pocket and it will reverse sharply intra-day. The SPY will rally above the 100-day moving average and it will stall. This is the pattern we need to wait for. It could happen today or it could happen in the next few weeks. Until then, favor the downside and keep your size small. Bearish trades in November and December rarely work out. I have one small call position on right now and this is as flat as I've been all year. I will day trade and I will wait for support. There is horizontal support at SPY $199.30 and I believe that is as low as we will go. Conditions in China are stabilizing and equities are the most attractive investment alternative. The market should be able to shoulder a tiny quarter-point rate hike and I expect to see support this week. Watch for the pattern I highlighted and use the 100-day moving average as your guide. . .

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