Stocks opened higher on Monday, but quickly floundered and closed slightly in negative territory with the Dow slipping 18-points while the S&P 500 gave up 3. Small caps were the losers once again as the Russell fell nearly 1%.
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The I-fund led the way getting a little payback from Friday's weakness, but the dollar finally had a bad day and that gave a boost to the international stock prices.
It's hard to trust a Monday morning gap up. The SPY (S&P 500 / C-fund) was down a minor 0.12% on Monday but it was the negative reversal that got the bulls' attention. Yes, the Dow and S&P 500 made a big move from Thursday's lows to Monday's high (nearly 3%) and stocks may have needed a pause, but technically it really can't afford to lose too much more without having a technical breakdown.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The 20-day EMA held as resistance on Monday, and the bulls may be watching the top of the falling wedge for support.
The Wilshire 4500 (S-fund) has now closed below the 200-day EMA for five straight days and that's a big warning sign, although the Wilshire isn't a largely followed index and technical analysis isn't quite as precise. The key here is the low last Thursday. I think that's the critical support or things could get very ugly, quickly.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The EFA (EAFE Index / I-fund) has done even more poorly than the small caps this year, and it is the strength of the dollar that is the story here. If the dollar can ever reverse back down, the I-fund will probably lead the way higher, but whatever is happening in our economy, or maybe more appropriately, the economies abroad, will determine the direction of the dollar.
Chart provided courtesy of www.stockcharts.comm, analysis by TSP Talk
And here is what happened to the dollar on Monday, which helped the I-fund to a 0.86% gain.
Chart provided courtesy of www.stockcharts.comm, analysis by TSP Talk
The Dow Transportation Index has been shaken up quite a bit by the Ebola outbreak as airline stocks have suffered recently. As bullish as Thursday positive reversal was, on Monday the Transports produced a rather negative kangaroo tail which tends to lead to at least some short term action in the direction of the reversal, which would be down in this case. If there was a positive it was that volume was rather light compared to the recent trading.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The AGG (Bonds / F-fund) closed relatively flat to slightly higher and basically did the opposite of what stocks did. That is, they opened lower, moved higher, then closed flat. The overhead gap (blue) was filled. Now we'll bee looking for the open gap below (red) to be a target.
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
Posted daily at TSP Talk Market Commentary
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