Stocks struggled early on Monday but stabilized and closed well off the lows. The final results were mixed in the major indices as the Dow gained 26-points, small caps and the Nasdaq lagged, the I-fund led percentage-wise, and bonds fell sharply.
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After the late morning bounce, there was very little activity and a dull market is usually a bullish market, but there were some minors cracks that we need to watch.
The SPY (S&P 500 / C-fund) continued its slow, 2013-like rise on Monday, and we'll just have to wait to see if it going to continue to ride along with the rising resistance line, or if we'll get a pullback that will finally give the bears some satisfaction.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
We have been talking about the new highs in the Nasdaq 100 (QQQ) but the Nasdaq Composite has lagged, and is still lagging although the recent action has been more bullish. The positive reversal day on Monday looks good for some possible gains at some point today, but I'm fairly confident that the open gap is eventually going to get filled some time soon.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
In last Thursday's commentary, I said, "Best case scenario [for the Russell 2000] - an intraday pull back to fill the gap, but a close back above the 50-day EMA. Too much to ask?" Maybe it was just a little too much to ask, but we did get the gap filled and the strong close did create a positive reversal day, but it didn't quite make it back above the 50-day EMA.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The problem? We had been watching what we thought could be a bull flag on the Russell, but Monday's weakness could be an issue. It's touch and go here but I did not like that bull flag nearly breaking. I don't think this index can hold up if it doesn't stabilize right here, right now.
The Transportation Index has been relentlessly strong, almost to the point were it may be getting parabolic. Not quite, but support is about 200-points below the current level and that gives room for a steep pullback.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Bonds had a bad day and we are seeing the open gaps get filled. The AGG bond ETF is testing the short-term rising support now.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
We get the May jobs report on Friday and estimates are looking for a gain of about 220,000 jobs, and an unemployment rate of 6.4%.
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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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