After three weeks of gains, this could be the week where the market rests.

You have seen all the commentaries on the market rally over the last three weeks. Some are calling it the Trump rally. I would rather call it the "end of uncertainty" rally or the end of regulation rally.

The markets are getting excited about the promised tax cut to 15% for corporations, a 10% repatriation tax for the $2.5 trillion in cash held overseas, the eventual end of Obamacare and the job killing 30-hour workweek. There are dozens of other pro business topics but they all start running together after a while. The key point is the roll back of the 21,000 new rules covering more than 75,000 pages that were implemented over the last 8 years on everything from what bathroom you can use to restricting employers from asking if a prospective worker has ever committed a crime.

Investors are breathing a sigh of relief and Trump is not even in office yet and he may not be able to actually do 75% of what he promised. Regardless, there is change in the air and the markets have been setting new highs almost every day.

Unfortunately, this could be the week that reality returns to the market. No rally ever lasts forever. The trend may remain in place for many months but the market must ebb and flow and give people a chance to take profits and the opportunity for new investors to establish positions.

The Russell 2000 has been up for 15 consecutive days and the best performance since 1996. Even if there is only a minor pullback of 5 points or so, there needs to be a pause so investors can reevaluate their positions.

The Dow is almost as overextended as the Russell but at least it paused the prior week at uptrend resistance from 2015. The Dow also needs to rest and 8,850-18,900 would be a good place for a retest and then a rebound to higher highs.

The S&P finally broke over the psychologically important 2,200 level and Tom Lee of Fundstrat still believes we could see 2,350 by year-end. There is one more level of uptrend resistance at 2,225 and we could see that tested soon.

The Nasdaq has had some starts and stops and is finally setting new highs as well. The 5,400 level could be psychological resistance but the index is moving in the right direction and a moderate pace that could be sustained. The Nasdaq 100 Index is still lagging as people sell their big cap techs to buy industrials, financials, etc. A breakout over 4,900 would do wonders for the broader market but that is slao strong resistance.

There is a very heavy calendar this week with all sorts of potholes but the employment reports will be the most watched. There is almost nothing that could deter the Fed from hiking rates in December but that chance always exists. A really bad payroll report on Friday could shake up the markets but it may not slow down the Fed.

I remain cautious about the market this week. We desperately need some material profit taking to relieve the overbought pressures and allow the rally to continue.

I do expect the market to go higher in December. We just need to get that profit taking behind us so investors feel comfortable establishing new positions. If we do get a dip over the next two weeks I would be a buyer.

Jim Brown

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