Stocks remained buoyant in front of today's FOMC meeting - probably the most important Fed meeting in many years. Volume continued to be fairly light as investors weren't too committed and the big money is avoiding any big bets before the interest rate announcement today. The Dow gained 140-points.
The technical analysis shows many possible outcomes for stocks and bonds but the Fed's decision today could tear up the charts and we may have a totally different outlook in a day or two. We'll see. It's a bit of a gamble to do anything leading up to the announcement today. One thing to keep in mind is that the immediate market response to the Fed's interest decision is not always trustworthy. It's more of a trading frenzy. It tends to be the days after the meeting that shows the ultimate direction. Not always, but we may have to be a little patient.
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The stocks funds all gained just short of 1% yesterday and the S and I-funds squeezed back into positive territory for the year. Bonds were down slightly.
The SPY (S&P 500 / C-fund) showed some improvement moving over the prior short-term peaks, but this still has bear flag all over it, but as each day passes and it doesn't break down, the flag gets weaker. The broader index charts show the bear flag more prominently.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Dow Completion Index (small caps / S-Fund) not only has a bear flag but a rising wedge, and both tend to be bearish formations.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Dow Transportation Index lagged a bit yesterday gaining 0.24% but it remained above the 50-day EMA for a 2nd straight day. That's a good start, but it too has a big rising wedge on it and they tend to break down.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The EFA (EAFE Index / I-fund) is also in a bear flag, although a little fragmented. It made a mini-breakout with yesterday's rally but those two open gaps below may get some attention if the Fed doesn't propel the market higher with good news.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The price of oil broke to the upside of the bull flag that we have been watching. It has been in a bear market and below the 200-day EMA, but it did move above the 50-day EMA again as it did at the end of August. While this looks potentially bullish for oil, it shows that bull flags do break to the upside, and that's why the bear flags on the stock index charts are concerning.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
Today is trading day #12 in September and that has historically been the start of a sluggish period for stocks, at least for the next week or two, and possibly into the end of the month.
Chart provided courtesy of www.sentimentrader.com, analysis by TSP Talk
The AGG (bonds / F-fund) pushed below the 200-day EMA again after breaking down from the rising trading channel earlier in the week. This looks like a bearish development but the Fed's action today could easily push it back in the channel - or see it break down further.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
Read more in today's TSP Talk Plus Report. We post more charts, indicators and analysis, plus discuss the allocations of the TSP and ETF Systems. For more information on how to gain access and a list of the benefits of being a subscriber, please go to: www.tsptalk.com/plus.php
Thanks for reading. We'll see you back here tomorrow.
Tom Crowley
Posted daily at www.tsptalk.com/comments.php
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