Stocks opened higher on Thursday but things quickly fell apart and the indices deteriorated all day. The 231-point decline in the Dow sounds awful and intraday charts look bad, but the indices didn't get totally clobbered as the losses were 1% to 1.4%. Bonds rallied.
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The SPY (S&P 500 / C-Fund) lost 1.1% and officially filled its open gap. It is now testing the support of the January highs and the 20-day EMA, and that's starting to get a little serious. The 50-day EMA is another 1% to 2% below the current levels and that may be the last level of support until warnings become stop signs.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The negative outside reversal days were all over the charts, and that's the second one we've seen on a few indices. That is not bullish at all, so the support levels are going to have to come through for the bulls and hold up.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Transportation Index had a very high volume negative outside reversal day yesterday (Thursday) and that is a concern. High volume days like that can be signs of a market change in direction. The hope here is that this pullback will find support at the new rising support line, which happens to coincide with a small gap that is still open on the Transports chart.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Bonds rallied as investors moved money from the stock market to the bond market. The question now is whether the resistance from the top of the recent sideways trading channel will hold or break to the upside.
Chart provided courtesy of www.decisionpoint.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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