Turnaround Tuesday turned into another Wild Wednesday as stocks opened lower and remained pinned down, particularly after the Fed policy announcement, which is a big change from what we've been used to. The losses were broad, but not extreme (about 1%). Bonds rallied again.
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We started the day, or at least I started Wednesday's commentary, with the futures sharply higher after Turkey increased interest rates to try to halt the slide in that country's lira. That did not last long as the lira did continue to fall, and that spooked the markets causing the futures to rollover in early morning trading.
The Feds did announce a new round of tapering and it has now gone from $85 billion a month to $65 billion and the market is throwing a bit of a tantrum. The market had been consistently rallying after Fed meetings so this is a change.
The S&P 500 (SPY) fell back below some short to intermediate-term support, and it looks fairly bleak support-wise on this chart, should the S&P not regain that line.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
But the annual chart shows some relief in the form of the longer-term rising support line, currently near 1760-1770.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
So far the decline might be considered a healthy pullback, after all the S&P is only about 5% from all time highs. But the negative divergences we have seen may not bode well for support holding this time, and we're all aware that it has been a few years since we've had a 10% correction - something that we normally see about once a year on average.
We know markets don't go straight up or straight down, but this chart that we have been following from mcoscillator.com (and edit/updated by TSP Talk) tells us that yes, sometimes they do. And this 3 peaks and a dome house chart pattern can precede a precipitous decline. Since about mid-December, I have been manually updating the action in the Dow (red line) so it may not be an exact representation of the actual action.
Chart provided courtesy of www.mcoscillator.com, analysis by TSP Talk
Humor me for a minute, and let's say this chart does play out in a similar fashion to the 1929 crash. It looks like in the next couple of weeks, we might get a decent pop to the upside. You might want to have a plan in place so you're not reacting like a deer in headlights if that "pop" does happen. Do you believe this type of decline is a possibility? Then you may want to write yourself reminder to yourself now to sell the next big rally, so you are not trying to make a decision when emotions are high.
Bonds rallied yet again as investors continue to favor them over stocks. Both of these charts have now broken to the upside of the 200-day EMA. I'm a little surprised at the ease in which they have done it, but the triple digit moves in the Dow can have an emotional impact on investors.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Here's a longer term look at TLT and it's interesting that yesterday's high filled a gap left open back in July. It was nearly filled in October and also in July, but now it's official. It is now looking to breakout -- or can it? Filled gaps can often act as resistance.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The bear flag on the 10-year Treasury yield broke down so the down trend trend continues.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Is a test of the 200-day EMA inevitable, or are yields oversold?
Read more in today's TSP Talk Plus Report. We post more charts and indicators, plus discuss the Sentiment Survey Results and its 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 TSP Talk Market Commentary
The legal stuff: This information is for educational purposes only! This is not advice or a recommendation. We do not give investment advice. Do not act on this data. Do not buy, sell or trade the funds mentioned herein based on this information. We may trade these funds differently than discussed above. We use additional methods and strategies to determine fund positions.
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We started the day, or at least I started Wednesday's commentary, with the futures sharply higher after Turkey increased interest rates to try to halt the slide in that country's lira. That did not last long as the lira did continue to fall, and that spooked the markets causing the futures to rollover in early morning trading.
The Feds did announce a new round of tapering and it has now gone from $85 billion a month to $65 billion and the market is throwing a bit of a tantrum. The market had been consistently rallying after Fed meetings so this is a change.
The S&P 500 (SPY) fell back below some short to intermediate-term support, and it looks fairly bleak support-wise on this chart, should the S&P not regain that line.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
But the annual chart shows some relief in the form of the longer-term rising support line, currently near 1760-1770.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
So far the decline might be considered a healthy pullback, after all the S&P is only about 5% from all time highs. But the negative divergences we have seen may not bode well for support holding this time, and we're all aware that it has been a few years since we've had a 10% correction - something that we normally see about once a year on average.
We know markets don't go straight up or straight down, but this chart that we have been following from mcoscillator.com (and edit/updated by TSP Talk) tells us that yes, sometimes they do. And this 3 peaks and a dome house chart pattern can precede a precipitous decline. Since about mid-December, I have been manually updating the action in the Dow (red line) so it may not be an exact representation of the actual action.
Chart provided courtesy of www.mcoscillator.com, analysis by TSP Talk
Humor me for a minute, and let's say this chart does play out in a similar fashion to the 1929 crash. It looks like in the next couple of weeks, we might get a decent pop to the upside. You might want to have a plan in place so you're not reacting like a deer in headlights if that "pop" does happen. Do you believe this type of decline is a possibility? Then you may want to write yourself reminder to yourself now to sell the next big rally, so you are not trying to make a decision when emotions are high.
Bonds rallied yet again as investors continue to favor them over stocks. Both of these charts have now broken to the upside of the 200-day EMA. I'm a little surprised at the ease in which they have done it, but the triple digit moves in the Dow can have an emotional impact on investors.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Here's a longer term look at TLT and it's interesting that yesterday's high filled a gap left open back in July. It was nearly filled in October and also in July, but now it's official. It is now looking to breakout -- or can it? Filled gaps can often act as resistance.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The bear flag on the 10-year Treasury yield broke down so the down trend trend continues.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Is a test of the 200-day EMA inevitable, or are yields oversold?
Read more in today's TSP Talk Plus Report. We post more charts and indicators, plus discuss the Sentiment Survey Results and its 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 TSP Talk Market Commentary
The legal stuff: This information is for educational purposes only! This is not advice or a recommendation. We do not give investment advice. Do not act on this data. Do not buy, sell or trade the funds mentioned herein based on this information. We may trade these funds differently than discussed above. We use additional methods and strategies to determine fund positions.
