Stocks bounced back after the post-Fed two-day sell-off. The Dow gained 126-points yesterday, which was well off the highs, but also off the lows. Volume was quite low so once again it doesn't look like the big money is jumping in enthusiastically yet. There was some technical damage done to the charts last week and they need some repairing or a test of the previous lows may be in the cards this fall.
One thing we know for sure after another triple digit move in the Dow... Stocks don't go straight up, and they don't go straight down. It's our job as market timers to make sense of these gyrations.
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Small caps lagged and bonds were down.
Oil was up, which has been helping stocks lately, and even more impressive was that it rallied while the dollar was also up strongly.
The SPY (S&P 500 / C-fund) rallied back up to the bottom of the bear flag before running out of steam on Monday. On the surface this is fairly weak action, but a strong day on decent volume could move it right back above resistance. That seems to be the less likely outcome but when the bulls get serious they can make that kind of move.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Dow Completion Index (small caps / S-Fund) broke and closed below its rising wedge and is back below the 20-day EMA. Along with the failure at the 50-day EMA, it's difficult to look at this chart as anything but bearish.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Dow Transportation Index moved up to the bottom of its wedge and above the 50-day EMA in early trading, but pulled back again and closed back below the 50-day EMA.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The EFA (EAFE Index / I-fund) is still within its bear flag and there are open gaps both above and below the current level. Bear flags tend to break down so it's in the same boat as the U.S. indices.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The price of oil rallied 3.6% yesterday and the market has been applauding the recent bullishness in oil. It is still in a bull flag, which would seem to be a bullish sign for stocks, but so far it may not have technically broke out so watch the $48 - $50 area, which would be a breakout.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The AGG (bonds / F-fund) was down slightly after its big 2-day rally. It has so far tested and held at the bottom of the rising channel and the 50-day EMA.
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.php
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