After a weekend of no deals and pessimism over the debt ceiling negotiations, stocks opened sharply lower on Monday morning, but they quickly stabilized and buyers took over, and the indices closed near the highs of the day. The Dow, which was down 100-points in early trading, ended the day up 64.
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[TD="align: right"]+1.04%[/TD]
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[TD="align: right"]+0.28%[/TD]
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The share prices above are from Friday since the TSP was closed yesterday and did not provide updated share prices. Tuesday's share prices will reflect the action of both Monday and Tuesday's action.
As I speculated yesterday, investor's fear of missing another big snap-back rally kept the indices buoyant as they were reluctant to do a lot of selling. That could all change should no deal be made by Thursday's deadline, but should cooler heads eventually prevail in Washington, it's not looking bad as the charts tell us things look pretty good for stocks.
The S&P 500 (SPY) saw a third straight day of solid gains and closes above the important rising support line plus the 50-day EMA. Barring any major negotiation incompetence, this chart looks like it wants to at least challenge the September highs. Of course that open gap down near 166 has to be kept on the radar.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The small caps are the bullish leader right now. The Russell 2000 is making new all-time highs despite the mess in Washington. It is now up 5% from the low made last Wednesday.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The current angle of incline for the Russell 2000 monthly chart seems a little unsustainable, and there is that long-term (going back to 2000) resistance line that should be of some concern. I think stocks could could have a wake up call in the future (maybe in early 2104?) but right now the charts say all is well. Why? I don't really know, but that's what they're saying.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Despite the bond market being closed for the holiday yesterday, the bonds ETFs slipped and continue their minor slide, but considering the possible ramifications caused by any kind of a default should the stalemate continue past Thursday, bonds are holding up rather well. I could see both of these charts testing the recent lows if we go into this coming weekend without a debt ceiling deal. So bond traders seem to be expecting a deal to be made.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
So stocks are up despite no deal being made. I guess we are set up to see some kind of a "sell the news" reaction, but the charts look good and the selling should find support - if a deal is made.
In today's TSP Talk Plus report we will look at the Nasdaq, the Transports, the short and intermediate-term indicators, plus the smart and dumb money put / call ratios.
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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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