It's really getting quite remarkable / frustrating / exciting / disappointing - fill in the blank. For the last two weeks the bears have put all kind of pressure on but they have not been able to do any damage by the time the market closes. At the same time the bulls have not been able make any progress on the upside during those two weeks so the stalemate continues. The Dow lost 15-points on the day but once again the bulls were able to take a large early loss and turn it into a very slight loss. The Nasdaq continues to lag but it too made a big comeback.
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As nerves were flying during the early sell-off on Thursday the safety plays were being ignored: Bonds were going down, gold was sinking, and the VIX moved from over 12.0 back down below 11 by the close, so perhaps this is truly just a rotation game for the stock market. The charts don't look bad and many indicators are neutral, but there are some major warning signs out there that have me concerned. Being overly bearish this year hasn't paid off but it may just be a matter of your tolerance for risk.
The SPY (S&P 500 / C-fund) sank down to the 20-day EMA near the open yesterday, but it held convincingly and rebounded strongly into the close. It's a bit sloppy, but that could still be considered a bull flag, although that 1st failed breakout is a concern.
The DWCPF (S-fund) lagged again but it too found support at the 20-day EMA and closed well off the lows. I had noted that large cup and handle formation several days ago and said it looks like the handle may have been a little small so a little more consolidating seemed reasonable to expect. Since then we've seen 4 more days of consolidation, but also a potential peak.
The Dow Transportation Index closed in positive territory holding at some key support. This has come a long way since the May low and it may be getting a little extended here, but if the price of oil doesn't rally it may keep this index buoyant.
The EFA (EAFE Index / I-fund) gapped sharply lower at the open on Thursday and closed somewhere between the open and Wednesday's close, so that left a good sized gap open (red) while the downside action filled a gap from back in May (blue), but down quite a bit after Wednesday's overpricing.
The dollar was up and on the day, following through on the big positive reversal on Wednesday triggered by the Fed's policy statement. It is still in a downtrend so that 50-day EMA may be tough to get back above.
The High Yield Corporate Bond Fund was down on the day but hit and held at the rising support line.
The AGG (Bonds / F-fund) was down slightly as it may be looking to fill that open gap between 109.50 and 109.75.
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Thanks for reading. Have a great weekend!
Tom Crowley
Posted daily at www.tsptalk.com/comments.php
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