The market posted a big red candle today. It was much overdue … and in fact needed for a healthy market. It simply cannot go up in a straight line and engender confidence among investors. Backing and filling is a necessary aspect of a healthy bull market.

The Energy Sector has demonstrated a surge in technical strength to lead the market higher this week, and at the same time it has surged in the SectorCast rankings.

This week brings a clean slate among stock traders as the holidays and end-of-year positioning has come to an end. The market continues to show signs that it wants to pull back a bit to work off its overbought condition and allow technical indicators like RSI and MACD to cycle back down in their normal swings. But the cash just keeps flowing in.

The stock market has been on cruise control for the holidays, with the bulls teasing the bears occasionally but giving little back. Powered by the Fed’s cash machine, the SPY has continued on its strong December path. The market is now in blue sky territory, and not even China interest rate hikes and lower consumer confidence readings can stop it.

The bulls continue to steamroll bears during December, despite closing November with ominous weakness. Powered by the Fed, the SPY bounced convincingly from strong support at 118 and has not looked back, even powering through November resistance at 123 with only a brief pause to reload.

On Tuesday, the market lost support at Nasdaq 2500 after losing S&P 500 1200 last week, and then threatened to breakdown below the psychologically important Dow 11,000. But alas, one bad day does not confirm a trend change, and today (Wednesday) was the exact opposite.

The market is finally giving us the long anticipated and overdue pullback. This is good for its longer term health. The media is attributing the weakness to news out of Ireland, but the fact is that the technical picture has been screaming for a pullback and retest of key support levels, including Dow 11,000.