Coolhand's Market Analysis

After defying the historical odds for a rally pre and post-holiday, the market stayed true to form by reversing its course to begin the new week. And as usual, the retracement was fast and deep.



Market strength began overseas, where word of a new eurozone fiscal pact was making headlines. The pact could make financial agreements legally binding and enforceable. There was also reports that the IMF is putting together a financial lending plan for Italy. However, that story is now being refuted.

On this side of the pond, early holiday shopping reports are coming in quite optimistic and that too helped set a big positive tone for today's trading.

The only bit of data today was new home sales for October, which showed an annualized rate of 307,000. That's a bit less than analysts were looking for, but it had little impact on the market overall.

Here's today's charts:



Big bounce for NAMO and NYMO. Both flipped to buys.



Same for NAHL and NYHL.



TRIN spiked lower in a big way and is highly suggestive of an overbought market. This signal alone would typically mean selling pressure may be imminent, but I'm not sure we'll see that after such a strong up move on the heels of several days of decline. TRINQ also spiked lower, but is only moderately suggesting an overbought condition. It will be interesting to see if we get any follow through upside action tomorrow.



BPCOMPQ tracked sideways and remains in a sell condition. It may be close to turning back up again.

So the signals are mixed, which keeps the Seven Sentinels in a sell condition.

We may very well rally from here, but the expectation for a Santa Claus rally makes me disinclined to play for one. Just like the expectation for a rally over Thanksgiving was a bust, the same may hold true for sustained move higher into the holidays.

Not that we can't have one, but I think it will depend on sentiment. If today's move sees follow through for most of this week, bullish levels may rise. And that could be problematic for this market. But first, we need to see how this week plays out.