These moves are program generated and they are searching for size in both directions.

PRE-OPEN MARKET COMMENTS MONDAY – I hope all of you had a great Thanksgiving! That is one of my favorite holidays. We got lots of snow this weekend and it is feeling like December.

ISM Manufacturing will be released after the open today and ISM Services will be released Wednesday. This week we will get ADP and Challenger. That will give us some insight on labor conditions, but the jobs report will not be posted. We don’t have numbers for October or November and the Fed will be flying blind into the FOMC Statement next week. Fed Fund futures are pricing in a 87% chance for another rate cut. That is not consistent with the Fed Minutes last week, but perhaps the tone has changed in the last month. The government shutdown is going to impact economic activity and I feel they should err on the side of caution.

I don’t ever recall the level of bad news being this high. Japan’s interest rates are climbing and a move above 2% would make it difficult for them to service their debt. China’s economy is tanking and one of it’s government backed real estate companies (China Vanke) that was “too big to fail” can’t secure loans. Both countries are selling US Treasuries. Russia’s refineries have been blown up by Ukrainian drones and there is a run on their banks. Their interest rates are around 20%. Blackrock is taking big losses in US commercial property. Chicago’s commercial property tax revenues have declined dramatically and now they hiked residential property taxes by more than 50% in many areas. I could go on, but I’ll spare you. Credit conditions across the spectrum from consumers to sovereigns are concerning.

YouTubers are calling for a market crash, but they have been doing that for the last year. I am not discounting the macro backdrop, I just know how long it takes these things to manifest into actual selling pressure. A big market drop rarely happens when everyone is expecting it.

We are seeing two-sided price action and this volatility is a sign that conditions are changing. This is the first sign of a possible trend reversal. That is not bullish or bearish so do not marry either side. Stay flexible and know that programs are going to test both sides in search of size.

Year end seasonal strength and a Fed rate cut next week should keep buyers engaged. That’s not much to lean on so I am keeping my swing trades to a minimum. I will sell out of the money put premium and I will be ready to hedge. I’ve been doing that and it has been working. I have reduced my swing trades in recent weeks after dodging a few bullets. I plan to focus more on day trading the rest of the year.

This morning we are stripping away the gains from the last two days. Those were light volume gaps up so there was no conviction behind the move. If the market marches right back into the overnight gap with stacked greens, some of most of the gap will fill. Overseas markets were down marginally. If the bounce is wimpy with mixed overlapping candles and half of the gap is preserved, we should see a nice shorting opportunity. If the first move is lower and we have a stubborn move lower with mixed overlapping candles, we could see a decent bounce and possibly get into the gap. The price action will lead us to opportunities and these are the patterns I am watching for. I am not expecting a strong directional move this morning. This is post-holiday trading and I don’t see any news that would spark a massive round of selling today.

Support is at the 50-day MA and resistance is at the close from Friday.