Insurance stocks and Homebuilders both have appeal in the weeks ahead

Markets remain in a tricky spot heading into Thanksgiving week, and today’s bounce failed to show sufficient improvement to think a low of any magnitude is yet in place. However, despite technical trends having turned negative this past week, I’m not betting on this decline extending too much longer before a reversal, and that could very likely happen next week, right ahead of Thanksgiving.   SPX has now largely weakened enough to satisfy the 3-5% consolidation that was thought possible for November,  yet some trend improvement will be necessary before trying to call a low.  Improvement in both market breadth and momentum will be necessary in the final six weeks of the year to start to regain confidence in risk assets, and a ratcheting up in percentage likelihood for a December FOMC rate cut should help Equity markets start to show some stabilisation. Overall, as the title of today’s report says, it’s right to play defence for those with a short-term bias until SPX can regain Thursday's (11/20) highs near 6670.

As discussed yesterday, Elliott-wave theory, Cycles and DeMark all seem to converge on late November as providing support and a rally.  Friday’s snap-back rally happened on above-average bullish market breadth, but as shown below, it failed to demonstrate enough structural improvement to call for a low of any magnitude.

Overall, the next 2-3 trading days certainly have the potential to show more volatility.  However, I am betting on a low in Technology by Wednesday of next week, which should help the broader market bounce into December.  My thinking at this point is that $SPX likely could face maximum weakness down to 6395-6450 and then bottom out and rally into December. 

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