Stocks tumbled on Thursday and the Dow posted its fourth straight triple digit move - this one a loss of 264 points. Losses of over 1% were seen in many of the indices, something we didn't see too much of over the summer.
The reports were that Russia is drafting a law that would allow it to seize foreign assets. Is that a temporary issue of sell the rumor, buy the news, or will it actually happen and have an impact on the global economy?
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The I-fund was not immune to the losses as it also dropped over 1%, and bonds were where investors dumped their money as the F-fund gained a solid 0.30%.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
This weekly chart shows prior significant breakouts over the last couple of years, and we've mentioned before that the last two times we saw choppy sideways action for many months before a new leg higher started. This current break down below the July highs actually matches what we saw after the other two breakouts (see the red arrows below.) The other two actually pulled back to the 20-week EMA before bottoming, so it's possible there's a little more room to go on the downside to test the 20-week EMA again. They also tested that EMA it with 2 bars (weeks) and we're still in the first week on this one.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Nasdaq 100 had been holding up well but if fell hard on Thursday with a 2% loss. The July high, the 50-day EMA, and a small open gap are just a little below the current levels so that strong support could be tested today (Friday).
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Nasdaq, which is much broader index, fell below those key levels fairly easily. But like small caps, the Nasdaq chart usually isn't quite as clean as the S&P 500 chart when it comes to technical analysis. The exclusively electronic trading may have something to do with that.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Wilshire 4500 (S-Fund) fell below the 200-day EMA and is just above the August low. The last time the 20-day EMA crossed below the 50-day EMA (small red circles) the Wilshire chopped around for several days before rebounding. Will we see a repeat?
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Russell 2000 (small caps) is testing the August lows and obviously needs to hold (or not go too far below) to make it a successful double bottom. It's stay below the 200-day EMA is getting long and it may only have a few days left before it becomes "different" than the prior two breaks of the 200-day EMA.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The EFA (EAFE / I-fund) broke down. It has now closed below the 200-day EMA for 3 straight days so it's getting serious. It is oversold but the technical picture is deteriorating and a rebound may find problems in the areas of falling resistance.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The AGG (Bonds / F-fund) were up mainly because the money from stocks has to go somewhere. Bonds may continue higher until stocks bottom, whenever that will be.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
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Thanks for reading! Have a great weekend!
Tom Crowley
Posted daily at TSP Talk Market Commentary
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