Stocks backed off for a second day yesterday. The Dow lost 101-points, small caps lagged, the I-fund held onto some gains, and bonds rallied sharply and yields are still falling. It's all a little confusing as we are getting different signals depending where you look.
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The loss in the S-fund nearly wiped out the weekly gain it had accumulated on Monday and Tuesday. I did notice that the fund has been alternating between positive and negative weekly returns for 10 straight weeks and it would be 11 if this week ends in positive territory. A negative week would end the streak since last week was also negative.
The S&P 500 lost about a half of a percent and is now testing the breakout area and trying not to fail for a second time. It still looks like a bullish chart, but if the support lines start getting taken out it will be a different story.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Nasdaq 100 (QQQ) also lost about a half of a percent and still sits above it 50-day EMA, but it may have its targets set on that open gap below 87. We know how strong that pull can be. Strong earnings from Cisco after the close yesterday may help the Q's today.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Russell 2000 filled its open gap yesterday and dipped back below the 200-day EMA. I posted a couple of indicators yesterday for the TSP Talk Plus subscribers that have me concerned and the small caps (and Nasdaq) seem to be acting as these indicators might be suggesting the rest of the market could be. So I think the Russell needs to bottom quickly or the Dow and S&P may start following its lead into a downtrend. Ideally, the 200-day EMA will trigger some buyers as it has done three prior times, but if you knock on the door enough times, eventually someone is going to open it.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Transportation Index, another market leader, is coming off new highs as well, which makes this market that much more confusing. New highs, downtrends, bond yields dropping - all contributing to the confusion.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Bonds shot up yesterday and yields continue to fall. Why? I'm not sure. The Fed is still buying bonds and that could be a factor, but low yields usually means slow economy, but yet the Dow and S&P are near all-time highs. Are the small caps and Nasdaq the only ones paying attention? Not likely, but something is up.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Thanks for reading! We'll see you back here tomorrow.
Tom Crowley
Posted daily at TSP Talk Market Commentary
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