Stocks were mixed yesterday, in a directionless day of trading. The Dow lost 19-point while the S&P 500 and Nasdaq closed flat as the emotions revolving around this upcoming election play out. The Dow Transportation Index and the small caps both had strong days.
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Oil was down sharply putting pressure on the Dow and S&P 500, and now falling below $49, it becomes more likely that the top of the $40 - $50 is not going to be taken out yet. The $47 area becomes some key support as well as the 200-day EMA, which may be the last roadblock in the way to a move toward $40 and the bottom of the range.
We start a new month today and sometimes that brings with it a new direction. Let's see.
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The SPY (S&P 500 / C-Fund) was flat but closed below the 100-day EMA for a second day in a row. It had only closed below that EMA a few other times since last March. After that support, the September and October lows are next near 211. The chart formation has been wobbly but it is holding on, and with the Transportation Index looking better, perhaps the SPY can hold up from here. But the election is still looming and Clinton is still the favorite but that's not 100% certain so a Trump victory is not priced in and that could cause some volatility - as would a Clinton win if the Democrats also take the House and Senate. The market prefers gridlock rather than one party in full control.
The DWCPF (S-fund) had a solid day gaining 0.4% and it is attempting to find support at the important 200-day EMA after falling below the prior fall lows last week.
The Dow Transportation Index was up 0.5% and is again testing the top of what appears to be a large bull flag. It could breakout from here or decide to test the bottom of the flag again, but bull flags tend to be bullish. Being the market leader, a breakout would be ideal for the broader indices.
The EFA (I-fund) tested and held at the 200-day EMA. Although it has been dancing along that support, it has only closed below it once since July.
The High Yield Corporate Bond fund fell below a 3rd level of support yesterday as the 50-day EMA and another of the trendlines gave way. This is a yellow flag at this point.
The AGG (Bonds / F-fund) is trying to fill the open gap, but the head and shoulder pattern, whose right shoulder also looks like a big bear flag, still has a lot of resistance near the top of that gap.
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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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