07/26/13
Stocks opened lower on Thursday, but a sharp midday rally pushed the indices back into positive territory, and they were able to hold onto those gains into the close. The Dow gained 13-points while the Nasdaq and small caps led the way higher.
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I watch the indices almost all day long (no, really) but I don't always have a TV or radio on to tell why things are happening. I'm more interested in the charts than the "why", so I don't even know why we saw that sharp spike around noon ET. I just know that the gains didn't do all that much to change the technical picture on the daily charts - except for maybe on the Transportation Index, which saw a strong positive reversal day.
The Nasdaq led the way higher with the help of some decent tech stock earnings reports, while the Dow lagged after some disappointing earnings, particularly from Caterpillar (CAT).
The S&P 500 held at the May high but ran into the recent support line, which could now act as resistance. The red lines could be considered a rising wedge, and we may have seen the breakdown already. The bullish side to this is that we are in a bull market and 2-day pullbacks in bull markets, while in an uptrend, can be buying opportunities so perhaps the dip is done.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Nasdaq and Nasdaq 100 both had good days following some strong earnings reports in some tech stocks. I would have liked to have seen the open gap get filled before the rally resumed, just for cleanliness sake, and that may still happen since there is a possible bear flag forming.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Dow Transpiration Index had a very nice positive reversal day yesterday after the IYT fell through the 20-day EMA in early trading. Reversal day formations and follow-throughs usually perform better when volume is high, so yesterday's volume didn't really do that for us. The Transportation Index itself (as opposed to this ETF) had a little higher volume, but still not washout-like volume.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Here's an indicator I used to use often but I have ignored it in recent years since it lost some of its effectiveness. The 10-day moving average of the ARMS Index is above 0.90 (on the chart / lower in number) again, and while this hasn't exactly been a barn burner of a signal, the market does have a tendency to slow down or pullback shortly after hitting this level.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The dollar (via the ETF - UUP) was down again yesterday, but it did fill an open gap on the chart and sometimes that can offer support.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
There is a large open gap up near 22.70 so I suspect that will get filled within a few weeks.
The recent 2-day dip sent our readers back into bearish mode as the TSP Talk Sentiment Survey came in at 42% bullish, 50% bearish. That's actually a fresh buy signal for that system. This quick move back to excessive nervousness by investors every time we have a down day is likely the reason this rally won't die.
Thanks for reading! Have a great weekend!
Tom Crowley
Posted daily at TSP Talk Market Commentary
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