Increased risk of escalating trade wars, along with tax selling, means that we are downgrading the market rating to Sidelines. You should be on the sidelines and in the safety of cash. Hit and run is the name of the game in this market, at least until mid-December.

Transports form breakaway gap down on Monday, December 2, 2019.

A breakaway gap down that formed on the Transporation ETF spider is typically not a swing low candlestick pattern. With the MACD doing a double pump to the downside, it looks like we’re headed back to test $63.26 support.

IWM pulls back after hitting predicted price target (green shaded area) on December 2, 2019.

The most concerning chart has to be IWM. With the sell-off on December 2, 2019, bulls ability to hold the major $157 support area is now in-play. If IWM sells off and falls back into the rectangle range from $145 to $157, it would be psychologically devastating to Bulls in the short-term. Markets should not fall back into previous ranges in a bull market.

Puts to calls surged to the highest level since October 2019 as investors rushed to hedge long bets on December 2, 2019.

It would not surprise me to see the next AAII survey swing bearish on the back of escalating trade wars.

Industrials, which are more leveraged to international trade appear to be leading markets lower.

A bearish Parabolic Sar sell signal occurred on December 2, 2019.

The most important chart to keep your eyes on tomorrow is high-yield debt. If high-yield debt continues to plunge as it did today, we could see a big pullback by the end of the week.

High-yield debt took a big plunge on December 2, 2019. One more big plunge tomorrow would signal that a sizable pullback in markets is coming by the end of the week.
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