The Dow gained 44-points on Monday and the S&P 500 slipped a point, but that wasn't the whole story yesterday. We saw sharp declines in the Nasdaq and the Russell 2000. Some high flying Nasdaq stocks were hit hard and the rest of the tech world seemed to be taken down in sympathy.
I heard talk that the up coming IPO of Alibaba is also somewhat responsible for the selling. Alibaba's IPO will be the largest Initial Public Offering ever and if anyone wants to be part of it, they may be raising some cash now so they can get their piece. For investors that could mean selling some of their current top holdings which might be profit taking, or their losers.
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The I-fund saw a minor loss and the F-fund (bonds) closed slightly higher in what looks like a little relief rally.
The FOMC meeting starts today and will go into Wednesday. The Fed has been very kind to the markets so I'd be surprised if they deliver anything but dovish rhetoric.
The SPY (S&P 500 / C-fund) is in a short-term downtrend but it is looking more and more like a falling wedge, which tend to break to the upside before hitting the apex. The July highs are still being tested and we've seen two closes below the 20-day EMA, which is a little concerning. So far it looks like a healthy, measured consolidation of recent gains, but that's not true of all of the indices.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Wilshire 4500 (S-Fund) has been sinking all month and Monday's action was the third large decline in the last five trading days. That's one close below the 50-day EMA. Not a deal breaker yet, but one more than the bulls want to see.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Russell 2000 took another 1% plus haircut while falling below the 50-day EMA on Monday. The pessimist in me sees this chart breaking down and wanting to get defensive. The optimist in me is hoping this is a pre-Fed meeting scare, with the selling being triggered to raise cash for the Alibaba IPO, as I mentioned above.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The EFA saw a small loss on Monday and for the first time in a while, the dollar stopped going up and has been moving sideways the last 5-days. The rising dollar was putting a lot of pressure on the I-fund, but the question is whether the dollar is just pausing, or getting ready to pullback - which would help the I-fund.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The IEF (Bonds / F-fund) has broken down badly but was due for a relief rally and posted a small gain on Monday. The small overhead open gap is likely to get filled. Bonds are oversold and obviously won't go straight down without at least a dead cat bounce at some point.
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 TSP Talk Market Commentary
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