7/12/12
Stocks were mostly lower yesterday although they did finish well off of their lows. Trading became volatile after the Fed minutes were released, but the indices ended the day close to where they opened. The Dow dropped 49-points.
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[TD] +0.004%[/TD]
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[TD] +0.05%[/TD]
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[TD] +0.01%[/TD]
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[TD] - 0.36%[/TD]
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[TD] +0.00%[/TD]
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The S&P 500 is down testing the point of the triangle formation where the ascending and descending trendlines meet. It also happens to be where the neckline of that original inverted head and shoulders pattern (red) would be.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
And speaking of head and shoulders patterns, you can see above that they are now permeating the chart since May.
The Nasdaq closed off its lows and the low nearly filled the large open gap we have been watching. Many times the bottom of a gap will act as support for a pullback so question is, is the "nearly" filled gap enough, or does it have to go a little further to make it official? The rising trendline and the 200-day EMA are in play as well.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Volatility Index (VIX) has risen with the recent pullback in stocks, but not as much as you might expect during a 4 or 5 day negative period.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The table below shows every other time since 1990 that the S&P dropped for 5 straight days, and during that time the VIX rose less than 8%. At the bottom, it compares returns to those times the VIX rose more than 8% during the streak.
Chart provided courtesy of www.sentimentrader.com
According sentimenTrader.com: "Contrary to the contrarians, it actually proved to be pretty good for stocks going forward, especially shorter-term. The S&P was consistently positive, with really only one notable loser during the next month."
The chart of Crude oil is creating a pretty bullish looking bull flag. How long the flag will take to develop - I don't know - but this type of pattern typically breaks to the upside.
If it does happen to break to the upside, I would say it would be a positive for stocks. Oil is very sensitive to economic data so an upside break could mean the oil market is seeing positive signs for the economy.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
You can see that oil is trading below the 50-day EMA and it failed on its first attempt to get above it, so any breakout would be tested right away. I'd want to see it hit $90 before saying this chart is bullish.
Thanks for reading! We'll see you back here tomorrow..
Tom Crowley
Posted daily at TSP Talk Market Commentary
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