Stocks pulled back on Tuesday with widely varying degrees of losses depending on the sector. The Dow lost 62-points, giving back just a fraction of Monday's gains, but the Nasdaq, smalls caps, and particularly the Transports, all pulled back more significantly. Like during Monday's buying, volume was quite light again so there were no signs of institutions dumping stocks yet, but there was technical damage done to some charts.
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The SPY (S&P 500 / C-fund) just about filled the gap opened on Monday, and the decline could actually be considered a failed breakout from Monday's 3-year highs.
The DWCPF (S-fund) lost about 1% on the day which filled the open gap before coming to rest at the 20-day EMA. The breakdown from the rising channel may be a warning sign, but probably not a concern if it can remain above the 20-day EMA. But if that 20-day EMA is taken out, the recent failed breakout here could be indicating a possible peak.
The Nasdaq 100 remains in that bear flag after failing to move above the upper resistance line yesterday. I'd look for Monday's open gap to get filled in the coming days.
The Dow Transportation Index lost nearly 2% on the day and it was worst day for the trannies since the May low. The 20-day EMA is being tested, which is normal and what we're seeing on many charts, but we can see that there are breakdowns in recent trends on these charts as well.
The EFA (EAFE Index / I-fund) pulled back like everything else, plus the dollar put in another positive day, which weighs on this fund.
The High Yield Corporate Bond Fund continues to wobble and we thought this could be the first place to look for clues if the stock market was going to rollover. There was a minor break in the rising trend with some important support at 88.00, and if that area is broken, it would trigger the first lower low in a while.
The AGG (Bonds / F-fund) moved up as investors sold some stocks and added to their bond positions. That 110 area has been stubborn resistance but support is rising and something is going to have to give here.
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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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