Stocks were down on Friday making it back-to-back 200+ point losses for the Dow, and a two-day decline of 456-points. Retail sales and the Producer Price Index, which seemed to be part the problem, both came in lower than expected.
The futures opened sharply lower on Sunday evening following this weekend's heinous terrorist attack in Paris. Emotional Monday mornings can be tricky to gauge.
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For the week, U.S. stocks lost between 3.5% and 4% while the I-fund fell 1.72% and all of the TSP stocks and bond funds are in negative territory for the month. The G-fund is the best performing fund this year at +1.76%.
The SPY (S&P 500 / C-fund) fell below the 200-day simple moving average on Thursday, and down to the 200-day EMA on Friday. Despite a spike lower in the futures on Sunday night, you never know how the indices will open on a Monday morning. If the S&P 500 does open lower it was fall below the 200-day EMA. The close would be important, and if we do see a close below both 200-day averages, that could be considered a failed bull market. We know the small caps and transports have remained in a bear market so this is troubling.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The gap on the weekly chart has been open for six weeks now and as I have shown before, there are no other open gaps on the weekly chart going back at least 20 years. The weekly chart also closed back below the 50-week moving average.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Dow Completion Index (small caps / S-Fund) failed at the 200-day EMA to start the month and has retreated since. The open gap near 1000 is now very much in play.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Dow Transportation Index has also repeatedly failed at the 200-day EMA, broke below the 50-day EMA on Thursday, and remains in a bear market. This is normally the market leader.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
This EFA (EAFE Index / I-fund) finished with a modest loss on Friday but I would expect some sharp losses in the European markets on Monday - at least to start the day. We could see that open gap become another open gap on the downside.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The High Yield Corporate bonds have been falling along with stocks, which makes sense, although stocks tend to follow these bonds so the direction is pretty clear right now.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The price of oil continues to fall and that's seems to be the cause of a lot of the pain in the market as energy stocks sink, plus the decline in demand for oil is a negative indication for the economy. Some of the losses have to do with an increased supply, which helps when we fill up our tanks, but it's not always good for stocks.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The AGG (bonds / F-fund) rallied on the sell-off in stocks and it has now filled the open gap. It still looks like a bear flag but if it can get back over the old support line, it could be a bullish move for bonds.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
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Thanks for reading. We'll see you back here on tomorrow.
Tom Crowley
Posted daily at www.tsptalk.com/comments.php
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