After an early push lower, stock rallied on some positive comments by the Fed, although the indices were mixed by the close. The Dow gained 118-points while the Nasdaq and small caps lagged again.
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Fed Chairman Janet Yellen said the economy is on track for solid growth in the 2nd quarter after mostly weather-related weakness slowed growth in the first quarter. She said interest rates will remain low for a “considerable time” as the housing market and the labor market remain weaker than they would like.
The SPY (S&P 500 / C-fund) tested the 50-day EMA again before rebounding and closing strongly. The Fed gave investors a reason to feel better about the market, but sometimes these emotional moves are quickly reversed. The 188 area is still holding and this is what the bulls need to take out. So far there have been more sellers than buyers at this level. This chart and the Dow look pretty good and I wouldn't discount a breakout to new highs, but the Nasdaq and Russell 2000 make things less obvious and throw a wrench into it. They need some help.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Nasdaq 100 (QQQ) fell below the new rising support line (although that support line is not official until we see a move over 88.) That 50-day EMA and the resistance from the current downtrend are the obstacles for the QQQ, and the small caps.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Wilshire 4500 (S-fund) posted a third positive reversal day and the prior two did produce short-term rallies, but both also failed at resistance. Perhaps the third time will be the charm?
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The bond ETFs look to be creating bull flags which normally precedes another push higher.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Janet Yellen was optimistic about the economy, but somebody better tell the bond market as yields continue to fall, and the bull flags on the bond ETFs have become bear flags on the yield charts.
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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