It was another wild day for stocks on Tuesday as the bulls opened the market higher, but sellers quickly stepped in and pounded the indices into the ground. An afternoon rally had some legs, but the bears took control again in the last 30 minutes of trading. After being up about 80 early on, the Dow ended the day down 130-points.
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The I-fund was spared the big losses as the overseas markets were closed before any real damage was done to the U.S. indices. It may pay the price today. Small caps lagged and bonds benefited again by being the safe haven.
The SPY (S&P 500 / C-fund) fell through the 50-day EMA, which is a bearish sign, but the indices are quite oversold in the short-term now. I've circled prior breaks of the 50-day EMA in the last 6-months and two recaptured the 50 EMA breakdown without too much more damage done, but one led to the sharp decline which became the head of our inverted head and shoulders pattern.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The SPY also broke below the rising support channel and the bottom of the open gap that we said could be strong support, but obviously not. That's a bit of a red flag.
The Wilshire 4500 (S-fund) closed above its rising support line and may have produced a reversal day with that long-tail, but it did close down over 1%, so that's not exactly a positive reversal.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The small caps of the Russell 2000 have lost over 3% within a week of hitting a new 52-week closing high. sentimenTrader.com says that's not usually a bad thing. Going back to 1979, on average every prior instances saw short and longer term gains. There were obviously exceptions.
Chart provided courtesy of www.sentimentrader.com, analysis by TSP Talk
The EFA (EAFE Index / I-fund) broke down making yet another lower low. The October low is now going to be tested and this one could produce some panic selling if broken, but it could set up a good short-term buying signal. But be careful. Trying to catch a falling knife can be painful.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The AGG (Bonds / F-fund) made a new high yesterday - something I did not think we would see for a long time. We see a rare open gap on the chart and I assume it will get filled soon, and the big negative reversal shows it may be on its way to do that.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The December jobs report comes out on Friday morning and estimates are looking for a gain of about 245,000 jobs and an unemployment rate of 5.7%. 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
Thanks for reading! We'll see you back here tomorrow.
Tom Crowley
Posted daily at TSP Talk Market Commentary
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