Boy, we've had quite the auspicious start to the New Year. Stocks opened lower on Monday and the selling intensified without much of an attempt from the bulls at all throughout the day. The Dow lost 331-points and we saw big losses across the board.
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The I-fund was pounded as the dollar continues to soar putting extra pressure on the fund. Bonds had a nice day as the breakout in the AGG continues.
The SPY (S&P 500 / C-fund) filled that open gap that we have been watching for nearly three weeks. There's also some rising support at the current levels which coincides with the bottom of that gap. That's a good one-two punch of support so we'll see what this market has in it. Breaking below that support would obviously be bearish, but it could also produce a panic sell-off low if the downside action gets too extreme.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
There is another open gap way down near 190 on the SPY and should that entertain thoughts of being filled, we'd get that middle of the head test out of the inverted head and shoulders.
The Wilshire 4500 (S-fund) is trying to find support at the 50-day EMA. The small caps have been outperforming the large caps, which is typical this time of year.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The EFA (EAFE Index / I-fund) is really flirting with trouble as support levels get taken out.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
One of the major factors to the weakness in the I-fund has been the relentless rally in the dollar for the last 6+ months.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
Chart provided courtesy of www.sentimentrader.com, analysis by TSP Talk
The dollar's strength is also part of the reason why commodities like crude oil and gold have been lagging, and in the case of crude, the damage has been brutal.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The AGG (Bonds / F-fund) had a nice day on Monday and the breakout is now in its 2nd day. We like to see 3 to 5 days above resistance to confirm a breakout. The thing to look for here is whether the AGG wants to test the October high, something I did not think we would see for a long time. Why would bond yields be hitting severe lows (yields go down when bond prices go up) if the economy is in good shape as we have been hearing and seeing in some of the economic reports? Makes you wonder what's going on.
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%. We'll get the jobs report contest going in the forum some time on Tuesday.
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Thanks for reading! We'll see you back here tomorrow.
Tom Crowley
Posted daily at TSP Talk Market Commentary
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