It is good to be back in the saddle after a great holiday break, which was much needed. There was a lot of volatility through the holidays, which normally have very low volume days. This holiday season volume was much higher than normal. Since then, the markets appear to be laboring in their effort to continue the recent rally.
For the last three days, the Indices have been in a pause. This is after a move off of the recent lows. However, while it appears price is impulsive, the internal components are not confirming the move. In fact, the rally off the lows has many of the characteristics of a countertrend move, which suggests the higher probability is for another leg to the downside. Unless that changes, use caution on long positions.
As price has been increasing, market breadth has been declining. Volume is collapsing. New highs are non-existent in both the S&P and NASDAQ. Unless those divergences are eliminated on any additional move higher, the risk is to the downside.
The Briefing outlines the areas of good trade location for the beginning of the week.