Another day, another early sell-off followed by a late rally. After the reversal, stocks ended the day mixed with the Dow losing 107-points, the S&P 500 and Nasdaq were nearly flat, and small caps led the way with a solid gain.
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A two-day FOMC meeting concludes today but there is no expected action from the Fed, nor will there be a press conference. There could be some comments made and we know any word from Janet Yellen could trigger movement in stocks.After the bell yesterday, Apple reported solid earnings and the Nasdaq futures popped on the news. Apple is also part of the Dow and the S&P so there is a light breeze at their back today.
The SPY (S&P 500 / C-fund) closed flat but it had to fight back more steep early losses to get there. That's generally a good sign for stocks but it did create a 3rd consecutive lower high and lower low pattern. The rising support line held for a second day. There is still a small open gap above that should look to get filled, but it would have to get back above resistance to do so.
The DWCPF (S-fund) led the way yesterday with a 0.56% gain as small caps took back a portion of Monday's losses. The overhead open gap was a draw, as we might expect, and the 1180 is the key level to watch now after it had failed to remain above the support of the top of the flag formation on Monday.
This data shows what happens after the Russell 2000 small cap index closes under the 50-day simple moving average for the first time in 50-days after a multi-year high...
Chart provided courtesy of www.sentimentrader.com
Tuesday was actually day 1 on this chart, and you can see that day 1 did have more up days than down, but only a 3% relevance. When we look out 3, 6, and 12 months, we can see high relevance with some negative returns.
The Dow Transportation Index fell sharply after UPS's stock tumbled. It fell through that rising support line that we had been watching, and while it rallied off its intraday lows, it still lost 1.5% and may be targeting the 50-day EMA.
The EFA (I-fund) rallied with the help of the weakness in the dollar. It nearly to fill its overhead gap, which is a draw, but it also has to deal with the bottom of that rising wedge, which could act as resistance here.
The dollar (UUP) gapped lower opening one gap (red) and nearly filling the large blue gap opened back in November.
The AGG (bonds / F-fund) was up but ran into the 50-day EMA yesterday. It did manage to get back above the 20-day EMA, the first obstacle, but there is more work to be done. It could break through to the upside, but that might take more selling in the stock market to get investors interested.
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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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