Stocks did an about face on turnaround Tuesday as the Dow took a 30-point gain into the afternoon, but finished with a 119-point loss. Was it Iraq? A bond auction? Or was the market just overbought and in need of a rest? We have negative reversal days on almost every index chart but so far no support has been broken.
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Bonds were up, and as we suggested yesterday, the I-fund did get a little payback on Tuesday posting just a 0.18% loss. But with the late selling yesterday in U.S. stocks, it will likely have some of that taken back today.
The SPY (S&P 500 / C-fund) made a new all-time high in early trading yesterday - then things went south and the SPY came all the way down to hit the bottom of the new rising wedge. We could be seeing another test of the old resistance line (blue), which acted as support a couple of weeks ago. There's nothing yet to suggest this pullback will be anything severe, but if the easy support lines start giving way, then we'll have to reconsider that.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The negative reversal sent the Wilshire 4500 (S-Fund) back below the March highs, and it is sitting near the recent rising support line. As we suggested earlier this week, this index may need more of a pullback to hold onto a breakout since it has come a long way in a short period of time.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Russell 2000 really reversed hard going from a 1% gain to a 1% loss. These negative reversals tend to be market reversing so there is some concern here. But I won't get too concerned until the 1150 - 1160 support areas start breaking down.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The weekly chart of the SPY shows us what a bull market looks like. There's no reason to believe that the bull market is topping, but there is about 10-points (about 5%) of space between where it is now and the bottom of the weekly rising channel.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
Bonds were up yesterday but the IEF remains within its trading range. It looks like it is trying to bottom, but it is near resistance and we'll have to see how it reacts.
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 www.tsptalk.com/comments.html
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