Stocks opened slightly higher on Monday but the bears went to work right away and we saw a stiff sell-off into the late morning before things turned around. The Dow was down over 100-points early, but close up 103. Not all indices ended the day with gains, but most had positive reversals. The small caps and Transports lagged again.
The Fed's FOMC meeting is today and tomorrow with the Fed policy statement announced on tomorrow afternoon when we could see some fireworks.
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Bonds were down, as was the I-fund.
The SPY (S&P 500 / C-Fund) made a lower low on Monday morning before reversing and closing at the highs of the day - gaining 0.5%. We didn't get confirmation from the small caps or Transports, and there is still some resistance with the 200-day EMA overhead, but the action looks good for some possible upside follow-through today. We didn't get the panic type selling volume that you'd like to see at a bottom, but it was above average. There is still room to move lower if it wants to test the rising support line or fill the open gap, but Monday's action looks good for at least some short-term positive action.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Dow Completion Index (small caps / S-Fund) lost 0.6% Monday but it also posted a positive reversal, although not like the S&P did. Closing near the highs of the day would be a much stronger reversal day.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Dow Transportation Index reversed from some sharp early losses and had fallen through the August lows before closing back above it. That is a decent sign, but anytime you buy a chart like this, you are looking at catching a falling knife. It could hurt.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The price of oil also reversed higher, and that may be why stocks did the same. A 2.5% rally was welcomed after the severe drop it has experienced lately. The old support line which broke down last week, could pose some trouble as resistance so today's action in oil will be important. Staying above $36 should help out the stock indices a lot.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The EFA (EAFE Index / I-Fund) posted a nice positive reversal bar and I would think it would attempt to fill that open gap before falling any further, but this is still in a bear market and any rally might be short-lived.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The HYG High Yield Bond Fund, which we watch as a possible clue to what might happen to stocks next, had a bad day so this action is a continued red flag .
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The AGG (Bonds / F-Fund) opened lower and stayed down all day, closing at the lows. We had mentioned that this chart looked bearish, but investors would go to bonds if stocks sold-off, and they did. Once stocks reversed the chart when back to its bearish ways.
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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