Good morning! The market ended last week on a bearish note with the Dow Jones Industrial Average falling more than 100 points intraday, although it managed to recover somewhat to close lower by 82.68 points at 12,398.01. Friday began with a modest downside gap following strong jobs data. The unemployment rate remained at 4.5%, but average hourly earnings increased 0.5%, greatly exceeding expectations and raising concerns that the Fed will discontinue its rate cuts for an extended period of time.

The market continued to sell off following the opening bell. The move stalled between 9:45 and 10:00 ET, followed by a lot of choppy trading over the next hour. The 5 minute 20 simple moving average served as resistance while the indices fell into a sloppy triangle along the day's lows. Volume declined significantly during this time and the range in the indices began to hug the lower end of the trading channel. These indicators all favored a bearish breakdown. That breakdown took place out of the 11:00 ET reversal period and volume increased to confirm the setup.

The market continued to drop for the following half hour. The pace was strong initially but slowed a bit as the drop closed in on an equal move as compared to the early morning drop from Thursday's highs. Although the strength of the selling helped prevent the indices from surging higher off the support, they still managed to hold these mid-day lows throughout the remainder of the session. The market crept higher from that point until running into substantial resistance from the early morning congestion. The increased risk on the afternoon led me to call it an early week to avoid trouble.

In my scanning over the weekend, I noticed that not only did most of the potential upside setups I was watching over the past month fail to materialize, but most began to pull in. This confirms the concerns I've had over the last two months for further upside at this time in the overall market. The indices themselves have been having a lot of trouble making new highs and then following through on them. Even on new Dow highs, we are seeing them retrace the next day. I am not looking to be aggressive on longer term shorts, however, because most of the market just appears to need a rest, which will tend to mean choppier trading as opposed to sharp reversals in many sectors on the monthly time frames. So my shorting will be more focused on daily and intraday setups and, for the time being, that is also true for any bullish patterns I happen upon for at least the next couple of weeks.

Economic Reports and Events This Week
Monday: Consumer Credit for Nov. (3:00 pm)
Tuesday: -
Wednesday: Trade Balance for Nov. (8:30 am), Wholesale Inventories for Nov. (10:00 am), Crude Inventories 1/5 (10:30 am)
Thursday: Initial Claims 1/5 (8:30 am), Treasury Budget for Dec. (2:00 pm)
Friday: Export Prices ex-ag and Import Prices ex-oil for Dec. (8:30 am), Retail Sales for Dec. (8:30 am), Business Inventories for Nov. (10:00 am)

Key Earnings Announcements This Week
Monday: LIFC, NUHC, and SCHN.
Tuesday: EMMS, GAP, GBX, HELE, LWSN, SVU, VOL, AA, EXFO, OXM, RI, SNX, and WDFC.
Wednesday: ASHW, DNA, and SAPE.
Thursday: CRAI, INFY, MTB, MTG, SRR, CAMP, and IHS.
Friday: No earnings are scheduled
Note: All economic numbers and earnings reports are in lines with those compiled by Yahoo Finance and Briefing.com. Occasionally changes will occur that are made after the posting of this column.

Toni Hansen is President and Co-founder of the Bastiat Group, Inc., and runs the popular Trading From Main Street. She can be reached at Toni@tradingfrommainstreet.com.