It was a quiet day on Wall Street Monday compared to last week's fireworks. The upside momentum stalled, but after a nearly 500-point push higher in the Dow, an 8-point gain may be considered a victory for the bulls, particularly since the indices closed near their highs of the day.
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The I-fund had a small loss, but it was the big winner last week and may have been due for a pause. Bonds closed slightly higher.
The S&P 500 (SPY) closed above the 20 and 50-day EMAs for a second straight day, and the 20-day EMA has curled up in an attempt to move back above the 50-day EMA, which would be a positive if it happens. There is a large open gap on the SPY near 184, which is rare, and there is also a very small, less noticeable open gap near 177.50 that may need revisiting at some point.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The annual chart looks like a typical 2013 bottom that turned into a new high before too long. The PMO indicator has curled up from oversold levels, but the concern this time is whether we are going to have another 2013, or if 2014 will be the year of volatility and finally get the elusive 10% correction. We almost had one, but it never materialized. Investors have become much more bearish than they were at the peak in late December, and the question is, will their nerves be the ammunition to propel the S&P to new highs, or will they change and become overly complacent again?
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The economically sensitive Transportation Index, considered the leader of the market, was actually down nearly 1% yesterday, and that's not usually a good sign. It is now back below the 20 and 50-day EMAs. It did break its steep downtrend like the other indices, and there is a large gap that needs to be filled above 134 on this IYT ETF chart, but it is clearly lagging. It needs to wake up this week or it could be a warning sign.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Another leader, the Russell 2000, is also lagging, but it did produce a positive reversal day yesterday and closed near the highs, which could be bullish for the short-term.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Bonds were basically flat on Monday as these charts continue to test the support from the 200-day EMA after their recent break above it.
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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