A slow day finishes with a bang! Stocks opened lower, but the bulls pulled the indices into positive territory and were winning the battle. By 3:30 PM the bulls were fully in charge and we were breaking above key resistance in several major indices. Then it all fell apart.
The Dow was up nearly 120-points with 20-minutes of trading left in the day before news from the ECB regarding Greek debt sent stocks reeling. The Dow ended the day up just 7-point while the other major indices finished in the red. The sell-off from the news was probably an overreaction, but with the market about to close it seemed to be, sell first, ask questions later for investors and traders.
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After two huge rallies in U.S. stocks to start the week, the market was heading into the close yesterday with a 3rd, but it was not to be. The small loss is nothing compared to the gains we already had this week, but it was the way it happened that was startling.
The SPY (S&P 500 / C-fund) broke above the wedge formation and key resistance line that we have been watching. It looked like the fake-out (on the downside) / breakout scenario was going to play out, but stocks moved sharply lower just before the close and we had a failed breakout that produced a negative reversal bar. It did close above the 50-day EMA for a 2nd straight day, but there is that small open gap below 202.50 that may want to get filled.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
A closer look shows the open gap, the failed breakout, and the wedge that seems to want to duplicate the prior tops in January. The 50-day EMA may be the support it needs, but that gap may be too tempting for it.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Wilshire 4500 (S-fund) also produced a negative reversal day but it just barely hung onto the 1058 resistance line. Resistance, once broken, can act as support. So far so good but it looks an awful lot like the prior two failed breakouts.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
During the 3:00 o'clock spike higher in stocks, the Nasdaq 100 (QQQ) ran up and filled its open gap before the Greek debt news hit the wire. We always say the tops and bottoms of gaps tend to act as resistance and support respectively, but it's almost magic how it works. What timing!
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The EFA (EAFE Index / I-fund) slipped back with the U.S. indices and that's two attempts at the 200-day EMA. There is a small gap near 62 that may need to get filled. I'm just waiting to see the outcome of this 200-day EMA test before considering the I-fund.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
After the big three-day rally, oil reversed course and lost 5.6% on Wednesday. Stocks were holding up pretty well despite this - before the Greek debt news anyway.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The AGG (Bonds / F-fund) actually ended on the upside (despite the F-fund being down) but it broke below the support line of its rising trading channel. There's no major damage done here but the breakdown does take a little steam out of the bullish case for bonds.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The January Jobs Report comes out on Friday and estimates are looking for a gain of 225,000 jobs and an unemployment rate of 5.6%. The jobs report contest is active in the forum.
Read more in today's TSP Talk Plus Report. We post more charts, indicators and analysis, plus discuss the Sentiment Survey Results and the allocations of the TSP and ETF Systems. For more information on how to gain access and a list of the benefits of being a subscriber, please go to: www.tsptalk.com/plus.php
The January Jobs Report comes out on Friday and estimates are looking for a gain of 225,000 jobs and an unemployment rate of 5.6%. The jobs report contest is active in the forum.
Thanks for reading! We'll see you back here tomorrow.
Tom Crowley
Posted daily at TSP Talk Market Commentary
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