Stocks fell yesterday as the Dow lost 113-points, while the S&P 500 and small caps saw modest losses, the International Fund rallied, and bonds ticked up.
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The S&P 500 lost 0.5% on the day but continues to hold above support. That's 6 days in a row of testing the support of the May high and the 20-day EMA, and something's going to give. It is options expiration week and barring any big news, we might expect trading to "stay the course" into Friday, but next week may be the tell.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Nasdaq 100 (QQQ) is still just a stone's throw from a new 52-week high, and as you'll see below, the bulls would probably prefer that there isn't a breakout this week.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Dow Transportation ETF fell to the 50-day EMA after breaking a couple of key support levels last week. The July low would be the next level to watch should the 50-day EMA break. And if that happens to the leader... not good.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Transports chart illustrates a point I wanted to make better than the other major indices, and it has to do with options expiration. The red arrows below happen to mark the Monday following options expiration week. Clearly the trend over the last few months has been to see the market reverse course the week after options expiration week.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
That's why I said I think the bulls might prefer the breakout on the QQQ not happen since we've seen reversals the following Monday. The Transports on the other hand, have been pulling back since the August 1st high and a reversal on Monday sounds bullish. The broader market needs to see these Transports rally next week.
The 7-10 year Bonds broke below the recent short-term support line, but there is now an open gap above.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Even if the gap gets filled, this ETF would remain under the 20, 50, and 200-day EMA's. This looks bearish for bonds, but until we see a new low, bond investors may be hoping for the recent lows to hold and give them a little bounce here.
The string of Hindenburg Omens signals are still hanging over the market, for whatever that is worth.
I'll be out of town for a few days starting this afternoon, but I plan on updating the website as usual - although my commentary Friday may be brief, and my schedule may be off a little and emails may not get responses quite as quickly as I'd like. Sorry for any inconveniences this may cause.
Thanks for reading! We'll see you back here tomorrow.
Tom Crowley
Posted daily at TSP Talk Market Commentary
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