Stocks rallied yesterday as the Dow gained 91-points on light volume. Small caps led the way and the I-fund did do a little payback after yesterday's muted losses. Bonds had a nice day but nothing serious as investors prepare for today's FOMC meeting and policy statement. How will the stock market send Ben Bernanke off?
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The stock futures are up after hours after Turkey's central bank announced sharp interest rates hikes late Wednesday. This is intended to try to stop the selling in emerging markets, inspire some appetite for risk, and perhaps firm up some of the currencies that have been falling rapidly.
The S&P 500 (SPY) bounced back on Tuesday, gaining back all of Monday's losses, and it closed back above the support line connecting the two prior 2013 pullback lows. It's possible that the reversal on Monday initiated the start of another "V" bottom. The concern may be that it looks like we will end up with a negative return this month, and if January is a negative month, does that set up a negative year (as in, "As goes January, so goes the year"...) where the rallies are sold, while in 2013 was the year of buy the dips?
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Nasdaq and Nasdaq 100 lagged but they performed relatively well considering the sharp losses from Apple, and that's rare.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
From sentimenTrader.com: "Of the 11 times AAPL has lost at least -5% the day after earnings, the Nasdaq 100 fund, QQQ, lost more than -1% six out of eleven times. Of the five times QQQ bucked the trend by not being dragged down by Apple, it lost ground over the next two weeks each time, by more than -4%. The dates were 10/19/00, 7/17/02, 10/16/03, 1/15/04 and 1/23/08."
The small caps bounced off of support but did not quite get back all of Monday's losses, and it closed right on the 50-day EMA. The good news is, the overnight futures would indicate that this index will move above the 50-day EMA today. The question is, can it close above it?
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The short-term indicators stabilized and some started to curl up slightly. The problem here remains the very negative divergences as the recent new highs in the S&P were not matched by similar highs in the indicators. Yes, the market sold off and that may have been the price the indices paid for the divergence, but is that it, or will this divergence lead to lower lows for the S&P 500?
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Bonds bounced back yesterday after opening lower. The 200-day EMA is still in play on these two bond ETFs with the TLT remaining barely above it, and the IEF just below it. The short-term trend is up in both and has been since the lows in late 2013, but they will have to break above the 200-day EMAs convincingly in the next week or so to keep that going.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The 10-year Treasury yield has created another bear flag, and should it break down, as bear flags often do and as we have seen twice this year already, bonds and the F-fund may be able to keep their rallies going.
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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