Stocks closed well off their highs on Wednesday, but still managed to end the day with decent gains. The Dow gained 76-points while most of the major indices gained about a half of a percent.
Better than expected earnings from a couple of large banks and Intel rallied on a solid report. The thing is, when expectations are low, it doesn't take much to impress investors. We recently talked about "sell the rumor, buy the news", or as I saw in Reuters yesterday, "the reduced expectations are helping companies clear a lowered bar."
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The I-fund was down despite a gain in the EFA and some weakness in the dollar. It was either paying back some fair value, or will be getting some today.
The S&P 500 (C-fund) was up but backed down after hitting the descending resistance line off the two recent peaks. Double tops tend to trigger pullbacks, and we got one, but triple tops are less likely to pull back much at all. The odds favor a breakout in the near future, but there are no guarantees. We have seen breakouts fail during the five month consolidation the S&P has been in.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Wilshire 4500 (S-fund) continues to perform well and broke out yesterday. It did pull back some off of the day's high, but still managed to close at a new all-time high.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Dow Transportation Index pulled another reversal on us. This one a negative reversal. This action is very strange and I thought the bounce off of the 200-day EMA on Tuesday would surely trigger more buying - and it did, but only for a short stint on Wednesday. The negative reversal sends momentum back to the bear's side, but I still think it is trying to bottom here.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The price of oil moved above $56 a barrel and that may have had something to do with the Transports declining, although the railroad stocks are struggling. The $56 price for oil has been a help the the market in general as stocks seem to wobble when oil falls below $50.
Here's some interesting data regarding the Dow (DJIA) outperforming the normal leader (Transports).
It's not overwhelmingly bullish, but it's more bullish than I would have expected.
The EFA (EAFE Index / I-fund) broke out to a new multi-month high and that 66.50 breakout area looks to be an important pivot point. As I mentioned above, the I-fund didn't seem to benefit from the gain in the EAFE but that may change today.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The AGG (Bonds / F-fund) was up slightly and remains in a rising trading channel, but it looks like it is also in a bearish looking rising wedge pattern too.
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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