It was another Turnaround Tuesday yesterday on Wall Street as most of the indices regained Monday's losses, plus some. The Dow gained 113-points while the S&P and small caps added just over 0.5%. The bearish Dow Transportation Index was down again.
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The I-fund lagged with the dollar up, and bonds were up on the day.
The Fed wraps up their FOMC meeting today and the policy statement and decision on interest rates should be released around 2 PM ET, and then Janet Yellen will hold a press conference at 2:30 PM. The big question of course is, when will they raise interest rates? Today? Not expected. September? Possibly. December? The answer could shake things up for the market. If we had to guess, we know Ms. Yellen does not like to disappoint the markets. But if there are rate hikes coming, the market might start another taper tantrum.
Here's what the Fed is concerned about. The last time rates were near 0% and the Fed started to increase was in 1937. The Dow eventually fell 49%. Of course today and 1937 have very little in common after 0% rates.
Source http://www.marketwatch.com
The SPY (S&P500 / C-fund) found some footing at the double test of the recent rising support line and rallied up to fill the small open gap as we suspected it might. It was also able to close above the 50-day EMA avoiding a 3rd straight close below it. The short-term trend is still down and the next obstacles are the 20-day EMA and the dashed red resistance line.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Wilshire 4500 (S-fund) gained 0.52% and the chart is getting squeezed between falling resistance and rising support. These apexes can be tricky because often the first break is a fake-out.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Dow Transportation Index continues to act bearishly and it was the only major index that we follow that was down with any significance. This continues to be a warning sign for the rest of the market but it's been out there for quite some time now.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The EFA (EAFE index / I-fund) retraced Monday's action and ended the day basically flat. Like the small caps, support is rising and resistance is falling. After closing below the 50-day EMA for 4 days in a row earlier this month, it has now closed below it for another 3 consecutive days.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The dollar looks favorable for the I-fund as far as the advantage the I-fund gets when the dollar is falling. Whenever I make a prediction on a breakout / breakdown I tend to be totally wrong, but here it goes... This looks like a bear flag ready to break down where it meets the falling resistance.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The AGG (bonds / F-fund) was up modestly and may be creating a "V" bottom, but there's a lot of resistance overhead and that could also be considered a bear flag. I'm sure the Fed will send some volatility into the bond market today.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
Thanks for reading! We'll see you back here tomorrow.
Tom Crowley
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Thanks for reading! We'll see you back here tomorrow.
Tom Crowley
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