Stocks continued their post-Fed "sell the news" reaction on Friday as the Dow lost 290-points. The debate continues as to whether the non rate-hike is just triggering some profit taking after the 3-week rebound off of the August lows, or if it is a reaction to the possibility that the Fed is telling us that the global economy may actually be weakening.
The price of oil is trying to answer the same question. We've seen a big rebound in the price of oil since the August lows, and the chart has created a nice looking bull flag. But it is stalling at the 50-day EMA and whether or not the bull flag breaks to the up or downside may give us our answer to the question about the strength of the economy. Oil would likely have a difficult time going higher if we are in a weakening economic environment. So keep an eye on the price of oil.
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A rebound in the dollar pushed the I-fund to its lowest closing price since September 4th. Bonds rallied again as investors looked for a safe haven.
The SPY (S&P 500 / C-fund) gave us the fake-out to the upside last week, but it hit the 50-day EMA and reversed down and now we are seeing the possible breakdown from the bear flag that we have been watching form for a couple of weeks.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The weekly chart of the S&P 500 shows last week's big negative reversal bar that closed back below the old support line, and it looks like the 50-week moving average was major resistance.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Dow Completion Index (small caps / S-Fund) also failed at the 50-day EMA and this bear flag / rising wedge looks prime for a breakdown, but so far the lower support is holding.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Dow Transportation Index broke down from its rising wedge, and that's just classic technical analysis.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The EFA (EAFE Index / I-fund) is still in the throes of a large bear flag and unless the August lows hold, it is looking like a we could see a major breakdown here.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The German DAX has broken down from its bear flag so it looks like the only hope here is that the lows do hold when tested.
Chart provided courtesy of www.sentimentrader.com, analysis by TSP Talk
The AGG (bonds / F-fund) was up again as investors needed a place to put money while selling stocks.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
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Thanks for reading. We'll see you back here tomorrow.
Tom Crowley
Posted daily at www.tsptalk.com/comments.php
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