Just realized that this was never posted in the blog...
Stocks remain under pressure as the Dow posted another triple digit loss on Friday, losing 143-points. The Nasdaq and small caps continue to underperform and their charts are starting to show some real cracks.
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This week, the week of Good Friday, has historically been a positive week for stocks, but we don't normally see this kind negative action in early April. Also, as we have posted before, this is a mid-term election year, and stocks have peaked in April historically during mid-term election years, starting a decline that did not bottom until October. Of course every year is different, and this is just what the averages are telling us.
For a second straight day, the SPY (S&P 500 / C-fund) remained below the 50-day EMA and the December high support line. This is a warning sign, and we have sure seen a lot of them recently. The trouble for market timers now is, many of these kind of sell-offs over the last couple of years have been great buying opportunities. But if turns out to be something more serious, staying in here could be quite costly at the pace the indices are losing ground.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The indices getting the negative attention lately are the Nasdaq and the small caps. The Nasdaq 100 (QQQ) is approaching the lows we saw in early February. The 20-day EMA has recently crossed below the 50-day EMA and while that is a bearish sign, it can also be a sign of being short-term oversold. Oversold markets that do not rebound are dangerous markets, so it will be important to get some kind of "dead cat bounce" this week.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The small caps have been hit hard and there are a couple of key levels that we are watching on the Wilshire 4500, which is what our S-fund tracks. This short-term chart shows that the index may be at an intermediate-term support line (blue), when you connect the three major lows going back to last October. It is below the 50-day EMA and about 22-points above the 200-day EMA. These will be real tests for the bull market.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The longer-term chart of the Wilshire 4500 shows that the index actually fell through the long-term support line (red) of its rising trading channel going back to late 2012. Quick breakdowns can be mended if they also fix themselves quickly. Otherwise we may need to start thinking correction, and possibly bear market. There is time to avoid this, but it is growing short.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Investor have been moving money into bonds and depending on what happens to the stock market, this could be a serious breakout. But if stocks rebound I would expect these bond ETF charts to move back into their trading ranges. If there is a change of character taking place in the financial markets where stocks begin a meaningful correction and downtrend, then bonds and the F-fund will likely be the investment of choice. But that's a big IF at this point.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Read more in today's TSP Talk Plus Report. We post more charts and indicators, plus discuss the Sentiment Survey Results and its TSP and ETF Systems. For more information on how to gain access and a list of the benefits of being a subscriber, please go to: www.tsptalk.com/plus.php
Thanks for reading! We'll see you back here tomorrow.
Tom Crowley
Posted daily at TSP Talk Market Commentary
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