If you look at the final numbers from Friday you could easily derive that it was another boring day for stocks. Yeah, the Dow gained a solid 89-points, but the S&P, the small caps, the I-fund, and the Transports all ended the day with gains or losses in the +/- 0.0X% range. But what a day it was.
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Just when I thought things were getting boring and there was little to talk about, we get a day like we had on Friday. The Dow was up nicely thanks to rally in the energy sector, which was up about 2.5% on the day, and the financials which gained 1.9%. But retail lost over 1% and the real losers on Friday were the high flying "FANG" stocks of the Nasdaq 100.
The Nasdaq 100 started the day with a new all-time high, but that preceded a precipitous decline over the next couple of hours including a mini "flash crash" in Amazon, which quickly lost almost 90-points before rebounding and closing down just 32-points. It was the worst day for the Nasdaq since Brexit, about a year ago
When these kind of declines occur and we see a snap back rally, there's a fair probability of a test of those lows, no matter how overblown that initial decline appeared. Don't forget that even though some folks got lucky and bought the lows in the Nasdaq on Friday, someone else was selling to them at those prices. The former group may want to take quick profits while the latter is not likely to jump right back in unless they get another chance at those low prices.
Chart provided courtesy of www.sentimentrader.com
The two-day FOMC meeting starts on Tuesday with a policy statement and press conference by Janet Yellen on Wednesday.
The SPY (S&P 500 / C-fund) rallied sharply early Friday, then declined even faster, before we saw things settle with just slight losses. The pullback found some support at the old rising resistance line before popping back up in late trading on Friday. Volume picked up on the move up in volatility and sometimes volume spikes can mark turning points.
The DWCPF (S-fund) broke out early on Friday to new highs before pulling back. This chart actually looks pretty good as we see a series of smaller cup and handle formations, but the failed breakout could mean it needs a little more time before a new leg higher emerges from the long consolidation.
The Dow Transportation Index was flat on the day but like everything else it closed off the early highs and well off the intraday "panic" lows. This could be a form of a head and shoulder pattern forming so it may be the right shoulder that needs to fill out before we see a breakout above that upper resistance line.
The EFA (EAFE Index / I-fund) fell below the blue trading channel on Friday, and there is still some open gaps below that may need some tending to before we see new highs again.
I've been concerned about the price of copper recently but in Friday's commentary we noted the bullish weekly chart. Well, we saw a breakout on the daily chart Friday that could be a good sign going forward for this economically sensitive commodity.
The AGG (Bonds / F-fund) was off slightly on Friday and the pullback came to rest right where we might expect a cup and handle breakout to come back and test. It also filled the first open gap, but there are a couple more below.
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Thanks for reading. We'll see you back here tomorrow.
Tom Crowley
Posted daily at www.tsptalk.com/comments.php
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