Stocks rallied yesterday, on the back of some solid earnings reports. The Dow gained 77.52 and the S&P was up about 0.4%, but small caps lagged again and the S-fund was actually down 0.05%.
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The I-fund led the way despite the dollar rising sharply for a second straight day. The F-fund was up slightly.
The Transportation Index has been making new highs every day, possibly because of the recent decline in the price of oil. But the chart of oil is showing signs of bottoming so we'll have to see if the leading transports can continue to rally.
The SPY (S&P 500 / C-fund) remains in its rising trading channel and, being right in the middle of it, has room to move in either direction. The trend is clearly up and fighting that may not be the best idea, but for those who like to trade there have actually been opportunities buy and sell. Going back to early June, we have seen 3 to 5 day dips, followed by a 5 or 6 day rally, repeated 3+ times.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
Those pesky small caps continue to lag. The Russell 2000 has been hanging around the 50-day EMA for the last four days trying to make up its mind which direction it wants to break.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
That is putting pressure on the Wilshire 4500 (S-Fund), which so far has done a good job of hanging onto that 50-day EMA. It's starting to resemble a bear flag, and that could start another leg down, so if this is going to turn into a "U" bottom, it may need to make its move up quickly.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
We saw a sharp rally in European stocks, and France's CAC 40 is back above some key support, but like our small caps, the bear flag does not look helpful.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The dollar (UUP) gapped up higher yesterday, rallying big for the second straight day. With the I-fund up 0.76% yesterday, you might think it wasn't hurt by the dollar's strength, but as we showed above, France's CAC 40 was up 1.5%, and London and the German DAX were up 1.1% and 2% respectively, so it had its impact.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
Bonds were basically flat on Wednesday. Not much to report here. The trading channel is what I'm focusing on now.
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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