For the second day in a row, stocks had a huge day with Dow adding a whopping 421-points yesterday. Apparently the market isn't all about oil because it was actually down yesterday. The market continues to feed off the dovish statements from the Fed.
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The I-fund had a big day in sympathy with the rally in U.S. stocks, and bonds were down.
The SPY (S&P 500 / C-fund) has nearly completed the right shoulder of the inverted head and shoulders pattern - in just two days? Yesterday's rally opened a big gap and we know they tend to get filled sooner rather than later, although the open gap off October's lows is still open, so perhaps this is also a runaway gap?
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
As we have talked about before, there are a couple of more common outcomes to inverted head and shoulders patterns and, possibly being at the completed right shoulder (RS) you can see that the first one is more positive for stocks in the short run.
The weekly chart of the S&P 500 shows a rather bullish picture, and unless stocks collapse today (Friday) it looks like we will see a positive reversal weekly bar created, which has been bullish going forward for the last couple of years.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Wilshire 4500 (S-fund) is making an almost perfect inverted head and shoulders pattern, but again the right shoulder may have been completed too quickly and that makes some folks suspicious.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The EFA (EAFE Index / I-fund) had a big day but remember, this chart is in a bear market and we should expect a bearish outcome - at least until it breaks the downtrend and / or moves above the 200-day EMA.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The AGG (Bonds / F-fund) was down yesterday as investors bought stocks instead of bonds, and the breakout above the red apex may be turning out to be a fake out, as we suspected it could.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
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Thanks for reading! Have a great weekend!
Tom Crowley
Posted daily at TSP Talk Market Commentary
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