Stocks drifted lower most of the day on Monday, likely working off Friday's slightly excessive response to an "OK" jobs report. The Dow shed 56-points and while there wasn't really any technical damage done, we are seeing some some warning signs.
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One warning may or may not be an issue anymore since stocks and oil may have decoupled from their recent marriage. We all know consumers like lower oil (and gas) prices, but the question is whether falling oil means something is wrong with the economy as we all thought when it was falling prior to the February lows.
The S&P 500 (C-Fund) hardly blinked with yesterday's small dip. The trading channel is ascending and support near 2050 looks fairly strong so any break below that would be something that will get trader's attention.
The Small Caps (S-fund) failed to close above the 200-day EMA after one close above it on Friday. It remains in a "F" flag like trading channel for now.
The Dow Transportation Index was down somewhat sharply at -0.90% yesterday but again the support where the 20-day and 200-day EMAs are crossing with the rising support line should be solid. If not, the 50-day EMA would likely be tested rather quickly.
The EFA (EAFE Index / I-fund) gapped down and continues to trade within the 50-day and 200-day EMAs. The 200-day EMA holding as resistance may be a sign of trouble, but as long as the 50-day holds we got to give the bulls the advantage. But if that breaks, there isn't much support below. Japan's Nikkei is really struggling lately but I'm not sure if that is an outlier, or a potential leader on the downside.
The AGG (Bonds / F-fund) was up modestly as bonds continue to hold up and rise along the short-term support line after the breakout last week.
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Thanks for reading. We'll see you back here tomorrow.
Tom Crowley
Posted daily at TSP Talk - Market Commentary
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