Stocks tried to put a rally together on Tuesday morning, but the bulls stepped aside and let the bears have another day. The Dow lost 105-points during the light volume sell-off. So, is this just a typical 2+ day pullback in a bull market or are we looking at the start of a pullback that takes the recent gains away?
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The small caps outperformed the large caps while the I-fund held above the water line. The F-fund (bonds) had a big day as yields have continued to decline since last week's Fed meeting.
The SPY (S&P 500 / C-fund) has pulled back from the double top which produced resistance and that is typical action. The question is, what kind of pullback will this one be? Volume has been very light this week, which is a change from prior pullbacks this year, and that's encouraging.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Wilshire 4500 (S-fund) held up well compared to the larger indices, but we did see it fall back within the rising trading channel. It's at the top of the channel now which means there is room to fall, but it could also rise along the top of the channel - action we saw often in 2014. See the Russell chart below for an example.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The small caps of the Russell 2000 have been doing quite well and they had every excuse in the world to fill that open gap below 1260 this week, but it held up. Now it looks like a bull flag, but those open gaps always keep our attention as a possible target. As mentioned above, you can see the RUT riding along the bottom of that trading channel resistance line in February for nearly 3-weeks.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The EFA (EAFE Index / I-fund) also ran away from an open gap and has barely pulled back like the S&P 500 has. It's trying to hold above the old resistance line, but any downside action today would take it below that new support. The narrow rising channel is still intact while it digests the recent gains.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The dollar was up yesterday after two sharp down days. It held above some strong support that, if broken, should produce a move down to the 50-day EMA, and that would help the I-fund. There is an open gap up near 26.00 that may want to get filled first. We'll see.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The AGG (Bonds / F-fund) had a big day as investors may have gotten a little nervous with stocks dipping. The bull flag did break to the upside, but the current rising channel is a little too steep to continue for much longer. Will we see a double top here this week near 112?
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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