7/19/12
Stocks opened sharply lower on Wednesday, but buyers stepped up immediately and never looked back. The Dow gained 103-points by the close. [TABLE="align: center"]
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[TD="align: center"] Daily TSP Funds Return
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[TD="align: right"] G-Fund:
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[TD] +0.004%
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[TD="align: right"] F-fund:
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[TD] +0.19%
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[TD="align: right"] C-fund:
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[TD] +0.68%
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[TD="align: right"] S-fund:
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[TD] +0.60%
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[TD="align: right"] I-fund:
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[TD] +0.06%
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The S&P 500 looks very good - remaining in a strong uptrend, but it is the only major index that is testing its early July high.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The other major indices, the ones that are usually considered the leaders, are still not quite breaking out. We are seeing a lot of triangle formations with the direction of the breakout still an unknown.
The Nasdaq is back above the 20 and 50-day EMA's, but still has a little work to do to break its downtrend.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Same with the Dow Transportation Index. It moved back above the 20 and 50-day EMA's but is struggling to reach back to the top of its downtrend resistance line.
Chart provided courtesy of www.sentimentrader.com
The small caps of the Russell 2000, another market leader, is still below an open gap that should get filled, but it is still 2% below the early July high.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
I believe the answer to whether these indices make new highs or pullback will be determined by the U.S. dollar.
If the 20-day EMA holds on this UUP dollar ETF, then the dollar could move back up and start to challenge the 23.00 area again. This would likely be a negative for stocks and we'd probably see the indices breakout.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
If however, the dollar moves below the 20-day EMA, tests the 50-day EMA and tries to fill that large open gap (red), stocks would most likely start to make higher highs.
The dollar will react to the economic data being released and the news out of Europe. Weakness in Europe will likely strengthen the dollar and cause stocks to struggle.
Today is the 13th trading day in July - the start of one of the worst 4-day periods of the year seasonality-wise.
Thanks for reading! We'll see you back here tomorrow.
Tom Crowley
Posted daily at www.tsptalk.com/comments.html
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