Stocks tried to rally Tuesday morning, but the selling pressure was a little too much and we saw a slow decline into the close. The Dow lost 67-points, the small caps lagged, and the I-fund got a little payback from Monday's losses.
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The SPY (S&P 500) still has that open gap to deal with and the bulls would hope that filling it will be enough of a pullback to keep the rally going. Both the bottom of the open gap and the January highs should provide some support, but the problem with them being tested is that the large rising wedge would have to break down for it to happen. Still, the index remains above the 20 and 50-day EMA's so any bearish talk is only short-term thinking right now.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
I didn't want to crowd the above chart too much so I wanted to make two other points about the SPY: First is that the short-term rising parallel trading channel (blue) is still intact - if we ignore the Ukraine sell-off bar - and yesterday's low found support on the bottom of the channel. The bad news is, yesterday's action produced a negative out side reversal day, which is generally bearish, at least for the very short-term, and worst case, potentially a market reversing move.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The small caps had a bad day as the Russell 2000 lost 1% and fell below the bottom of the rising wedge. The bottom of its open gap has held so far, and officially the gap is not quite closed yet.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Nasdaq 100 did officially close its open gap and broke below the rising wedge. The latter is one of the warnings signs we're looking for so the bottom of that gap, and then the 20-day EMA are the next levels that need to hold, or we'll be piling up the warnings signs.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Bonds were up slightly yesterday but both of these charts failed to close above the 200-day EMA for a 3rd straight day, although they moved above the 50 EMA. This is where there we would most likely see resistance if the downside is going to take over.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
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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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