Late selling spoils rally

Stocks opened sharply lower on Tuesday after some early bomb threats to multiple airlines, but the dip buyers were at the ready to do their thing and we saw some solid gains by early afternoon. However, like on Monday, the gains faded into the close and the Dow ended the day down 28-points.

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Small caps were up slightly and the I-fund led the way as the dollar fell sharply, while bonds continued to slide after hitting overhead resistance.

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The SPY (S&P500 / C-fund) tested the 50-day EMA on Tuesday and held, and managed to close above the 211 area that we have been watching for support. The fact that we haven't seen the bulls make their move yet could mean the bears are going to make another attempt at taking this below the 50-day EMA like we saw several times before - see the red circles marked below. It seems the market has a need to shake things up before rallying. That's not necessarily the case, but that's how it appears at the moment.

Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk

The Wilshire 4500 (S-fund) held up a little better than the large caps and it actually temporarily broke the short-term downtrend, but it could not close above it.

Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk

The EFA (EAFE index / I-fund) was up nicely with the help of a down day for the dollar. The technical picture doesn't look half bad right now if the 50-day EMA is going to hold. A few days below it doesn't hurt, which is why we like to wait 3 to 5 days before declaring a breakout / breakdown in the indices.

Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk

The dollar / UUP fell sharply yesterday and in the process filled one gap (blue) while opening another. It nearly filled the second open gap but not quite. UUP did close well off the lows but below the 20 and 50-day EMAs.

Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk

The short-term indicators are now all pointing upward and coming off their oversold readings. It looks like a good start but we know how fickle these short-term indicators can be.

Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk

The AGG (bonds / F-fund) flopped again and is once again testing the 200-day EMA after failing at the 50-day EMA.

Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk

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Thanks for reading! We'll see you back here tomorrow.

Tom Crowley


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