Lately stocks have been repeating this daily pattern of opening higher, being sold off after the initial rally, then closing strongly. It wasn't explosive but clearly the dip buyers are still hanging around and that means there is still a lot of underinvested folks out there looking for an opportunity to buy. The Dow gained 49-points, the small caps lagged, and the Nasdaq Composite made a new all-time closing high after a 0.50% gain.
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Bonds had a nice day, but the story yesterday was the strength in the I-fund because of a sharp decline in the dollar. The loss in the dollar was in part because of a much weaker than expected ISM manufacturing number, but remember, weak economic data seems to be the pill to keep the Fed away, so stocks held up well.Admin Note: Our annual NFL "Survival Pool" is starting next weekend. It's free and very easy to play. If you're interested in participating, check out this forum post for more information.
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The S&P 500 (C-Fund) gained 0.30% yesterday pushing close to its 2016 closing price high. It seems to be reaching for the top of the trading channel, which is now several weeks old. The problem is the top of the channel has held as support the whole time. We may be getting closer to a breakout, but is that possible in September? The other option is the trading channel holds and we see a move back to the bottom and it tests support again. Seasonality is not on stocks side, but seasonality isn't a primary indicator. It just make things a little tougher for the bulls.
The DWCPF (S-Fund) closed at a new high yesterday after some morning selling. The small caps lagged yesterday but making a new high puts it in the leader position for this cycle. As I mentioned above, the Nasdaq also made a new high so that's two good signs.
The price of oil rallied again yesterday putting it back above the 200-day EMA despite closing well off the intraday highs. This still looks suspect and remaining above the 200 as well as the 50 day EMA will be crucial.
The EFA (I-fund) added onto its recent breakout above the bullish inverted head and shoulders pattern. Most of that gain came from the weakness in the dollar and a nice day for stocks in Japan, otherwise the European markets actually didn't do all that well yesterday.
Here's that loss in the dollar yesterday, which was quite a blow and again impacted by the weak ISM number.
The AGG (Bonds / F-fund) had a nice day on Tuesday closing near its trading range highs but will have its work cut out for it to breakout. The weak ISM and the weakness in the dollar pushed yields down and bond prices higher.
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Thanks for reading. We'll see you back here tomorrow.
Tom Crowley
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