Stocks opened higher on Wednesday and this time the bears stepped aside and let it happen. The Dow gained 236-points and it looks like we have a valid positive reversal. But as you will see in the S&P 500 chart below, the bears may not be quite done and could take another shot at taking stocks down down - before the upside resumes. That may or may not happen, but it has happened several times this year under similar circumstances.
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The I-fund had a big day with the help of the dollar declining again. And bonds, bonds, bonds. Not good.
After closing for 4 straight days below the 50-day EMA, the SPY (S&P500 / C-fund) rallied over 1% and moved back above it yesterday. The ascending parallel channel is still intact with the SPY back in about the middle. But there are some short-term concerns. Take a look at the red gaps and arrows below...
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
It has been amazingly consistent. We see a gap up higher off the recent lows, but the next two days basically give back those gains. Also as consistent, the rally then resumes after the 2-day pullback. Interesting.
The Wilshire 4500 (S-fund) gained over 1% yesterday and has held up rather well recently compared to the S&P 500 and I-fund. But unlike the S&P 500 and I-fund, the S-fund did not make a new high in May. So, is it just playing catch up, or is the S-fund ready to lead again?
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Nasdaq Composite posted a big positive reversal day on Turnaround Tuesday, and followed through on Wednesday as we'd expect a reversal day to do. That hasn't always been the case lately.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The EFA (EAFE index / I-fund) gapped higher creating yet another open gap while filling another. Gaps are very common on the EFA because most of the trading in the international stocks is done while the U.S. markets are closed, but it still has a strong tendency to fill those gaps eventually like other charts. That said, there's an open gap down by 65.50 that may get revisited in the near future.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The dollar did fill that large gap that we have been talking about. The question is, now what? This chart is certainly not bullish but sometimes a filled gap will act as support (or resistance if overhead) and then we get a reversal - as we saw earlier this month (blue box.)
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The AGG (bonds / F-fund) is falling precipitously. There will be a relief rally at some point but jumping in now is like try to catch the proverbial falling knife. It could be painful.
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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