The dollar spiked again yesterday sending oil and stocks sharply lower. The Dow lost 333-points as the fear of higher interest rates continues to shift investor sentiment.
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The S-fund fared slightly better than the big caps because they are not as impacted by the negative effects of lower oil prices. Bonds were up as investors looked for a little safety.
The SPY (S&P 500 / C-fund) fell sharply through the 50-day EMA yesterday, opening a new gap in the process. Volume spiked and we are either seeing the big money running for cover because of the potential interest rate hikes, or it was some panic overreaction selling like we saw during previous pullbacks.
Speaking of prior pullbacks, the last four pullbacks lasted 7, 5, 5, and 6-days respectively. The current pullback is 6-days old.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Wilshire 4500 (S-fund) is closing in on the 50-day EMA, which has already been penetrated on the S&P 500. It is basically in the middle of the larger rising trading channel, and while it is possible, it doesn't necessarily mean it will test the bottom of the channel. The small caps outperformed on Tuesday because the Dow and S&P 500 were more impacted by the sell-off in the price of oil.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The EFA (EAFE Index / I-fund) gapped lower on Tuesday and fell below the important 50 and 200-day EMA's. If the 50-day EMA went above the 200-day EMA, that would have been a very bullish intermediate-term sign, but instead it has started to rollover again as the overbought pullback is starting to get more serious.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The dollar has been trouble for the I-fund over the last couple of days, and you can see that it stepped on the accelerator yesterday. The strong dollar also pushed oil below $49 a barrel, and we know the $50 level has been important for the stock market.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The AGG (Bonds / F-fund) was up modestly and like a magnet, it ran up to fill the open gap and test the neckline of the recent head and shoulders pattern. Technically, this is where it should find resistance.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
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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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