Stocks stumbled on Tuesday but the losses were tepid as the bulls did a pretty good job of holding things up when it looked like the bears were trying to roll the indices back down again. The Dow ended the day down 9-points during another light volume trading day.
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The small caps lagged and the I-fund led the stock funds with the smallest loss, while bonds were slightly lower.
The SPY (S&P 500 / C-fund) was down slightly after pulling back to fill the open gap yesterday. The 50-day EMA is still an obstacle that must be overcome if the U.S. market is not going to go follow what the the European markets did this summer.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Russell 2000 filled its open gap during its 0.78% decline, but it did close above the 200-day EMA for a 3rd straight day, and given the 3 to 5 day rule, we're almost getting some confirmation that we've seen the low - but now quite yet. So far it looks similar to the May breakdown.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Wilshire 4500 (S-fund) lost about a half of a percent and remains below the resistance of the descending trading channel. It has been below the 50-day EMA for nearly three weeks now so we've gotten tons of warning signs here. The one thing that has kept us somewhat optimistic here was the action this past spring. The Wilshire fell below the 50-day EMA for several weeks, but never really strayed too far from it. Back in April and May it did struggle to get back above the 50 EMA until it finally broke out in late May.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The EFA (I-Fund) also filled the small open gap that was created on Monday, after filling an old open gap (from April) last week. If open gaps are the targets, than the I-fund looks great since there are three large gaps above. But it's not that easy. We know gaps are lures that usually get filled sooner rather than later, but when they don't get filled sooner, it could take a lot of time. But they all do tend to get filled eventually. The EFA closed right on the 200-day EMA.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The QQQ filled it's gap and nearly got back to break-even. It's above the all three of the major EMA's and it does not look bad. If this is going to be the leader, the S&P 500 has some hope.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
Bonds were down slightly yesterday and the AGG fell back below the resistance line that we have been watching. I have been expecting either a strong breakout or a pullback to the bottom of the wedge, but instead it has been just hanging around that resistance. It's a wait and see.
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 TSP Talk Market Commentary
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