Stocks opened weakly yesterday, and closed weakly, but there was some buying in between keeping the losses to a minimum. The Dow ended the day down 42-points and the losses were very modest in the other major indices as well, with the exception of the Dow Transportation Index, which was up again, making another new high.
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As you'll see below in the charts, the Transports gained 0.72%, but there may be signs of a reversal day, something has led to a couple of down days in the past. The Nasdaq and the small caps gave some of their recent gains back yesterday, but we didn't see the intensity of selling in these that we had become accustomed to this year on down days. It could be a good sign, or just the calm before a storm.
The SPY (S&P 500 / C-fund) made another intraday high on Wednesday but closed just slightly lower after 4 positive days in a row. The gap near 190.50 remains open and should be a short-term downside minimum target. The sooner it gets filled the better, otherwise we'll be watching for that pullback until it happens.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
This Nasdaq 100 (QQQ) nearly made a new 52-week high yesterday, but these type of double tops usually generate some kind of a pullback before new highs are sustained. The gap is there to be filled and the old rising resistance line near 89 could be a target. If this is going to make a cup and handle formation, then this would be the cup.
Chart provided courtesy of of www.decisionpoint.com, analysis by TSP Talk
The Russell 2000 lost about a half of a percent yesterday, but closed off the lows, and above the 50-day EMA and open gap. Interesting test. I'd like to see the gap get filled, but the bulls will also want to see the 50-day EMA hold. Best case scenario - an intraday pull back to fill the gap, but a close back above the 50-day EMA. Too much to ask?
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The market leader is the Dow Transportation Index, and look at it making another new high. That small kangaroo tail sticking up may be a short-term concern. The last few pullbacks have not lasted more than 2 or 3 days, but that has been enough to allow the Transports to recharge and make another new high.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Today is trading day #20 in May, and depending how you look at this, could be a good or bad day seasonality-wise. The final 2 days in May have a strong positive bias, but most Mays only have 21 trading days, and there are only 21 this year as well. So, if you go by the final two days of May being strong, then today would play into the positive bias. If go by the literal trading day #20, then today would have a negative bias.
Chart provided courtesy of www.sentimentrader.com, analysis by TSP Talk
Monday is the first trading day in June, and you can see that the first week in June is historically positive - particularly the first two days.
Chart provided courtesy of www.sentimentrader.com, analysis by TSP Talk
Bonds had another nice day and the rally off of the old resistance line makes for such a nice looking chart. There are some open gaps on the AGG bond ETF chart that may come into play, but this chart looks bullish. Why bonds are rallying and yields are still falling, I don't know - particularly with the S&P 500 also at all-time highs.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
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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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