Stocks opened sharply lower on Thursday after some negative data was released out of China, but there was some buying in afternoon trading and the losses were not all that steep considering the early panicky action. The Dow low 176-points, but the other major indices lost less than 1%, and the leader, the Dow Transports, were actually up 0.3%. Bonds had a nice day.
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The S&P 500 (SPY) fell below the short-term support line and the loss created a new open gap while backing off from the recent highs. It closed off the lows creating a possible reversal day, but the breakdown is somewhat of a warning sign.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Dow actually fell all the way down to the 50-day EMA but it did rebound some off of that support. There is an open gap above, and as we know, they tend to get filled sooner rather than later.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Russell 2000 also closed well off its lows and the late December high held again as support. That 116 area on this charts looks to be an important area of support.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Dow Transportation Index actually rallied yesterday on strong volume, despite most of its components being down on the day. A couple of railroad stocks had big days helping the index stay positive.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The dollar gapped lower and closed near the day's low and that helped the I-fund outperform the C and S funds on Thursday. The rising wedge has now broken down sending bond yields lower and the price of gold and silver up.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Bonds were the beneficiary of the loss in stocks as we saw solid moves higher in both the TLT and the IEF bond funds.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
There were some resistance levels taken out and both are trading near their 200-day EMA's. If bonds are to remain in a bear market, the 200-day EMA should act as some resistance. That will be a test for the rally in bonds.
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Thanks for reading! Have a great weekend!
Tom Crowley
Posted daily at TSP Talk Market Commentary
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