Another strong open accompanied by a weak close for stocks yesterday. This is not a very healthy pattern and we continue to see the leading Nasdaq and small caps indices lag badly. The Dow ended the day down 99-points, but it was made worse because it had been up 98-points out of the gate on Wednesday morning.
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The SPY (S&P 500 / C-fund) is in an interesting position, outperforming the leading indices. The inverted head and shoulders pattern is still holding on, and we have a possible flag formation over the last week or so that does not look bad. The neckline and the 50-day EMA will be key support if tested (blue circle).
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The PMO indicator looks somewhat ominous, resembling the pattern it made just before the January sell-off.
The small caps were pounded and the Russell 2000 ETF fell through its 50-day EMA after breaking below the 20-day EMA and the rising support line earlier in the week. That's three pretty good warning signs for us.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Transportation Index doesn't look all that bad right here, but it is getting close to some dangerous levels. The flag formation is still holding and the index is now testing the rising support line, which coincides with the bottom of the January open gap near 133.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Bonds are still negotiating a trading range although the TLT longer-term bond ETF did poke through to a higher high yesterday. the 7 to 10-year ETF is still right in the middle of the range and that the one that I am more interested in for our F-fund.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The yields are still within their ranges and the TLT (above) may need to see the 30-year yield breakdown before confirming its breakout. It's testing the support now.
Chart provided courtesy of www.decisionpoint.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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