It was another wild day on Wall Street as the indices opened higher and then dropped sharply before quickly finding their footing and rallying. The best was yet to come as the indices put it into overdrive during the last couple hours of trading, and the Dow ended the day up 260-points.
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The small caps participated yesterday, which is a change, and the I-fund was negatively impacted by the big rally in the dollar, and did not get to see the late rally in U.S. stocks. Bonds were off slightly.
This rally was ECB triggered, but there weren't really any surprises. Perhaps it was a relief rally in that their QE is a done deal. Is this a green light for stocks, or was this a rally that needs to be sold?
The SPY (S&P 500 / C-fund) is certainly acting like we might want it to after finding support at the bottom of the right shoulder of its inverted head and shoulders pattern and blasting through its 50-day EMA, but can it finally make the big breakout above the neckline and stick, like it has failed to do twice since late November?
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The action really looks good but there may be more work to do on the upside before we can dismiss the possibility of a rounded top. (I still say that one day spike higher in December was a bad tick, but the data people have never corrected it if it was.)
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Wilshire 4500 (S-fund) has basically completed its right shoulder, but it now has to complete the tough part - the breakout. The breakout in December looked easy enough, but it turned out to be a fake-out. This 1058 area has been a tough nut to crack.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Transportation Index (market leader) really came to life with a huge 2.9% gain on Thursday and plowing through its 50-day EMA. It has been in a trading channel since peaking in early December, and the top of that range is the place to watch.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The EFA (EAFE Index / I-fund) was up and closed above its 50-day EMA once again. This is certainly looking a little better but it is running straight into trouble in the form of descending resistance lines and the 200-day EMA. It's in a bear market and if it wants to change that it must first get back above the 200-day EMA.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The dollar was a big problem for the I-fund yesterday as the it rallied and Euro sank on the ECB quantitative easing (QE) announcement.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The AGG (Bonds / F-fund) has pullback after its recent breakout. It also broke below s narrow ascending trading channel, but this is starting to look more like a bull flag than a peak. That throws a wrench into the stocks breaking out possibility. Can stocks and bonds breakout together?
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
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Thanks for reading! Have a great weekend!
Tom Crowley
Posted daily at TSP Talk Market Commentary
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