Down 264-points at its lowest level on Thursday morning, the Dow climbed back in afternoon trading and ended the day down just 79-points. Janet Yellen spoke after hours and short sellers may have wanted to lighten up on their bearishness before her speech.
Yellen made it fairly clear that interest rates will be going up later this year. I guess the questions now are, will it be at the October or December meeting? And how much and how often will they be raised once started?
The positive reversal yesterday has so far crept into the after hours trading of the index futures as we saw some additional gains Thursday evening. The overnight futures markets has been wild recently so it's hard to predict how that strength will translate into Friday's open.
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The I-fund didn't get the benefit of the late rally in U.S. stocks so look for some relief there today. Bonds were up slightly.
The SPY (S&P 500 / C-fund) broke down this week but it is down about 6% from last week's high so it could be a bit oversold in the short-term. Janet Yellen spoke yesterday and knowing the market didn't respond well to no rate hike last week, she let everyone know there is one coming soon, so the weak economy scuttlebutt may subside a little going forward.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Dow Completion Index (small caps / S-Fund) also reversed nicely and now has two small overhead open gaps that may need attention. But even if they get filled, it could stay below the new descending resistance line.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The EFA (EAFE Index / I-fund) tested the August 24 low and rebounded so that's a positive. There are two good sized overhead open gaps that could be rebound targets. So some short-term positives but still a very vulnerable chart.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Dow Transportation Index closed off its lows Tuesday but still lost over 1% on the day, and as you can see - or should - this is not a healthy chart overall.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
October's seasonality chart certainly has its up and downs and has a reputation as being a scary month because of some infamous market crashes that have occurred in October, but in reality October has a decent record overall. But once we get through October we'll all probably feel a little better about stocks.
Chart provided courtesy of www.sentimentrader.com, analysis by TSP Talk
The AGG (bonds / F-fund) reversed down yesterday as stocks rebounded. They have been moving slowly but steadily higher but that could end if we get a rebound in the stock market.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
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Thanks for reading. Have a great weekend!
Tom Crowley
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