The Bears have Kidnapped the Bulls

It seems that it is now improbable that we will see a new all time high in the coming weeks.  I think we may be heading back below 2060 into oversold territory.  I really thought that the market would have one more go above 2130, but alas, the downward action is pointing towards a correction.

A correction is overdue and quite frankly required.  The slow chop upwards over the last couple of months has reduced the volume in the market as fear built around the highs.  As I have mentioned before, less volume means more manipulation by the algos searching for stop losses, both in the shorts and the longs.  In my opinion this is why we have seen large volatile swings in the market on a daily basis recently.

This kind of market chop without significant rally’s or sell off’s is near an end.  The market can only do one of three things, go up, go down or go sideways. and it never does one phase for very long before switching to another type of market action.  So despite the possibility of a dead cat bounce in the next couple of days, I expect more selling this week.

Market News:

U.S. stocks traded mostly lower on Monday as investors eyed a calmer bond market and weighed greater expectations of tightening following Friday’s strong jobs report.

On Friday, nonfarm payrolls for May beat expectations with the addition of 280,000 jobs. Analysts also cheered a greater-than-forecast 8 cent increase in hourly wages and a 5.5 percent unemployment rate. Signs of continued strength in the labor market strengthened the case for the Federal Reserve to begin raising short-term interest rates in September.

Germany’s DAX entered correction territory as European stocks declined on continuation of Greek debt negotiations. Last week, Athens postponed a payment deadline to the IMF.

On Monday, European Central Bank governing council member Christian Noyer said if Greece had to leave the euro zone, it would not cause a problem for the currency bloc but rather for Greece itself.

The G-7 leaders also wrap up a two-day summit in Bavaria, Germany.

Tuesday

Earnings: HD Supply Holdings, Lululemon Athletica, Burlington Stores, Hovnanian, Quiksilver, Greif, Oxford Industries

7:30 a.m.: NFIB survey

10 a.m.: Wholesale trade, JOLTs

1 p.m.: $24 billion 3-year note auction