On Friday we got a taste capitulation selling that you'd want to see before a market makes a low, but I believe the 3-day weekend held it back from completing a serious reversal. The Dow did finish the day about 150-points off the lows on Friday, but still closed with a 391-point loss on the day. In a twist, the lagging small caps and Dow Transportation Index held up the best on the day, outperforming the other indices.
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It was looking like the week could end flat or positive before Friday's action, but there was not a lot of investors who were willing to buy heading into the long weekend. Volume was higher but some of that was because it was an options expiration day. On Monday the stock markets were closed but the futures markets were open and the action ended up quite flat so the buyers weren't too excited, but the sellers didn't push it either.
The S&P 500 Index (C-Fund) hit the September and August lows on Friday and briefly broke through before a modest reversal saw it close above those prior lows. Volume was elevated although not quite at the level we saw at the August lows. There's a minor kangaroo tail reversal showing but the S&P closed too close to the lows for it to be a strong reversal pattern. It's not very common to get a market low on a Friday so it wouldn't be much of a surprise to test Friday's lows early this week.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The weekly chart of the S&P 500 Index shows the damage done and could mean that 2016 is going to be a bumpy year, even if we do get a relief rally from the oversold conditions.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Dow Completion Index (small caps / S-Fund) has proven to be as weak as the bear market chart has been forecasting and now we are seeing a breakdown from a large head and shoulders pattern. The technical downside target would be south of 850, but that doesn't mean it will head straight down. A move back up to the neckline, currently near 965, is often tested first.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Volatility Index (VIX) shot above 30 on Friday, its highest reading since the summer sell-off, but well off those panic selling numbers we saw in August.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The market is looking somewhat like the 2011 market when stocks also struggled. If there is a positive to be found, the fact that the VIX is not hitting those panic level on this test of the summer lows is somewhat encouraging. Notice the lower high in the VIX back in 2011 when the S&P tested the lows in October. A market crash is very rare but it is not out of the question in this kind of environment so we could see the VIX continue to rise, so keep an eye on it for clues. If it stays below 30 we should get a relief rally.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The EFA (EAFE Index / I-fund) gapped down yet again and there is now a family of open gaps above that will eventually get filled. Those two red lines are parallel to each other so perhaps the downside support is being tested now.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The AGG (Bonds / F-Fund) pushed up to nearly test the October highs. It remains in short-term rising trading channel and will benefit as long as stocks continue to struggle. Being that stocks may be due for at least some temporary relief, bonds could pay the price.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
Read more in today's TSP Talk Plus Report. We post more charts, indicators and analysis, plus discuss the allocations of the TSP and ETF Systems. For more information on how to gain access and a list of the benefits of being a subscriber, please go to: www.tsptalk.com/plus.php
Thanks for reading. We'll see you back here tomorrow.
Tom Crowley
Posted daily at www.tsptalk.com/comments.php
The legal stuff: This information is for educational purposes only! This is not advice or a recommendation. We do not give investment advice. Do not act on this data. Do not buy, sell or trade the funds mentioned herein based on this information. We may trade these funds differently than discussed above. We use additional methods and strategies to determine fund positions.
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It was looking like the week could end flat or positive before Friday's action, but there was not a lot of investors who were willing to buy heading into the long weekend. Volume was higher but some of that was because it was an options expiration day. On Monday the stock markets were closed but the futures markets were open and the action ended up quite flat so the buyers weren't too excited, but the sellers didn't push it either.
The S&P 500 Index (C-Fund) hit the September and August lows on Friday and briefly broke through before a modest reversal saw it close above those prior lows. Volume was elevated although not quite at the level we saw at the August lows. There's a minor kangaroo tail reversal showing but the S&P closed too close to the lows for it to be a strong reversal pattern. It's not very common to get a market low on a Friday so it wouldn't be much of a surprise to test Friday's lows early this week.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The weekly chart of the S&P 500 Index shows the damage done and could mean that 2016 is going to be a bumpy year, even if we do get a relief rally from the oversold conditions.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Dow Completion Index (small caps / S-Fund) has proven to be as weak as the bear market chart has been forecasting and now we are seeing a breakdown from a large head and shoulders pattern. The technical downside target would be south of 850, but that doesn't mean it will head straight down. A move back up to the neckline, currently near 965, is often tested first.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Volatility Index (VIX) shot above 30 on Friday, its highest reading since the summer sell-off, but well off those panic selling numbers we saw in August.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The market is looking somewhat like the 2011 market when stocks also struggled. If there is a positive to be found, the fact that the VIX is not hitting those panic level on this test of the summer lows is somewhat encouraging. Notice the lower high in the VIX back in 2011 when the S&P tested the lows in October. A market crash is very rare but it is not out of the question in this kind of environment so we could see the VIX continue to rise, so keep an eye on it for clues. If it stays below 30 we should get a relief rally.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The EFA (EAFE Index / I-fund) gapped down yet again and there is now a family of open gaps above that will eventually get filled. Those two red lines are parallel to each other so perhaps the downside support is being tested now.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The AGG (Bonds / F-Fund) pushed up to nearly test the October highs. It remains in short-term rising trading channel and will benefit as long as stocks continue to struggle. Being that stocks may be due for at least some temporary relief, bonds could pay the price.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
Read more in today's TSP Talk Plus Report. We post more charts, indicators and analysis, plus discuss the allocations of the TSP and ETF Systems. For more information on how to gain access and a list of the benefits of being a subscriber, please go to: www.tsptalk.com/plus.php
Thanks for reading. We'll see you back here tomorrow.
Tom Crowley
Posted daily at www.tsptalk.com/comments.php
The legal stuff: This information is for educational purposes only! This is not advice or a recommendation. We do not give investment advice. Do not act on this data. Do not buy, sell or trade the funds mentioned herein based on this information. We may trade these funds differently than discussed above. We use additional methods and strategies to determine fund positions.
