Stocks opened sharply lower on Monday, and while it was on a much smaller scale, the action resembled the that of last Monday's wild day where the open was the worst part of the day, the Dow rallied back to near break-even, then puttered into the close - losing about half of those opening losses. The Dow ended the day down 115-points.
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The C-fund lagged and bonds were down.
The SPY (S&P 500 / C-fund) rallied strongly on Wednesday and Thursday of last week and then on Friday it broke even as it the relief rally ran out of steam. On Monday it pulled back modestly and we could either be facing the start of a test of the recent lows or, with volatility still quite high, it could be the bulls and bears just battling it out before the next push higher. Market action might indicate we are entering bear market activity, but it usually feels like that at the bottom of a correction as well, so there are no certainties here yet.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Dow Completion Index (S-Fund) has suffered quite a bit but recently it has been outperforming the larger cap stock indices. Perhaps because there were bigger bargains after the sell-off, but I wouldn't read too much into that. This chart has been in trouble for a while and needs to improve and break above some resistance before the all's clear sign is given.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The EFA (EAFE Index / I-fund) chart is also in rough shape. We've had a lot of warning signs that this market was breaking down, but during bull markets we've become so accustomed to buying dips that we sometimes ignore the obvious.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
More on September seasonality from sentimenTrader.com, in particular when August ends with a big loss:
Provided courtesy of www.sentimentrader.com, analysis by TSP Talk
The AGG (bonds / F-fund) tried to rally early but closed down with minor losses. The bear flag (blue) is taking shape making this chart look a little "iffy" but it is still within what could be a rising trading channel.
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 www.tsptalk.com/comments.php
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