Stocks opened higher and rallied in front of the Fed's policy statement, and afterward explode even higher. The Dow gained 288-points and we saw 2% plus gains in many indices. Technically, the charts are not out of the woods yet, but Wednesday's action helped.
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The I-fund had to give a little payback after Tuesday's price but the reaction to the Fed after the overseas should help in today's price. Bonds were down as investors jumped into stocks.
Whenever you get volatility like we've had recently, you know there is something in the air that is putting pressure on stocks. Sometimes it's obvious. Sometimes it's not. The plummeting price of oil has been the current downside catalyst and from what I can tell, oil is still about half of what it was earlier this year, so the big question is, can stocks rally if oil does not bottom? Probably not, but what can happen is that oil can put in an oversold dead cat bounce and that could give stocks a shot in the arm. That's what happened yesterday. There was some relief in the price of oil, and stocks rallied - and the Fed gave it some help as well by not delivering bad news, which some were expecting.
The S&P 500 / C-fund had a big day on Wednesday but ran all the way back up to the 50-day EMA and stopped. Yesterday's range basically mirrored the trading range of Tuesday's action so there is a chance it will pause here and retrace some of those gains. This means there was no breakout yet, but clearly the bulls took charge on Wednesday. You can see how much trouble the S&P 500 had in October when it got to this point. What will happen this time?
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Wilshire 4500 (S-fund) had a huge day yesterday gaining 2.55%. It did close above its 50-day EMA and so far the 200-day EMA has held. It's looking good, but can it go straight up from here, or does it need more time to consolidate? I think we could see a push down again today and put the onus on the bulls to prove themselves again, but the 200-day EMA looks pretty strong as support.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Dow Transportation Index lagged a bit yesterday but the chart created a large positive reversal day, which have worked out well for this chart in the last several week - meaning the reversal days did indeed create short-term directional reversals in the chart.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The EFA (EAFE Index / I-fund) was overdue for a rebound after falling precipitously all month. Despite what it looked like, stocks don't go straight down and the EFA needed some relief.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The seasonality surrounding Christmas has started with today being day -5. Lot's of green ahead, historically.
Chart provided courtesy of www.sentimentrader.com, analysis by TSP Talk
The AGG (Bonds / F-fund) was down and remains below the December 1st high.
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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