Chart of the Day: SPX Struggles To Break Downtrend

I wanted to see the S&P 500 (SPX) hold above the 850 level, but 845 is close enough. The market really fell out of bed late in the day, after holding up reasonable well for most of the trading session.

The SPX is running into resistance right at that downtrend line I highlighted above. Depending on how thick you draw your trendline, you could argue that we are a little above or below the line. But what's important is that the market doesn't break back down materially below this trendline.

The ideal scenario would be for the market to mark time for a little while, on low volume, and then make a stab to convincingly break above this downtrend line that has acted as a ceiling for the market since mid-September.

I think the late-day selling was a combination of factors: first, traders are worried that tomorrow's jobs report is going to show a surprisingly big number that could spook investors. So they probably took profts and loaded up some shorts to try to game the report.

Second, there were a lot of rumors swirling today, as well as substantiated reports, that hedge funds are seeing high levels of redemptions. Citadel fell -13% in November, and is down -47% ytd. That's brutal, and investors will likely want out. Many of these funds had to enact "gates", which freeze investors from being able to make withdrawals, and give the managers more time to wind down their positions in an orderly manner.

But the late day selling felt like there was some redemption selling going on today nonetheless. The only silver lining was that today's pullback came on lighter volume than the last few days. Bulls want to see rallies on higher volume, and pullbacks on light volume.