Stocks were struggling early on Wednesday but the bulls showed up and took back Tuesday's losses quite easily as the bears stood by and watched without much of a push back. Oil may have triggered it. The Dow gained 113-points. The Transportation Index was down and nearly broke down, but the reversal pushed it back into a more positive situation.
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We have been talking about the possible decoupling of oil and stock prices but this seemed to be related. Stocks started to rally in sympathy with a rally in oil on Wednesday morning, fueled by a lower than expected crude inventory report at about 10:30 AM ET.
The S&P 500 (C-Fund) ran back up to get back Tuesday's losses but what, if anything, does the recent breakdown from the rising trading channel mean? After breaking below the support a couple of weeks ago, it hit the support line a few times, but this time it has been acting as resistance. Is this a top forming or is it just a change in the angle of incline for the bulls?
The Small Caps (S-fund) rallied and is again testing the important 200-day EMA.
The Transports broke below some key support but the rally pushed it right back into the rising channel so no harm no foul for now. It was a nice reversal day despite the modest losses on Tuesday, but it remains below the 200-day EMA.
The EFA (EAFE Index / I-fund) rallied nicely to nearly fill one of its open gaps yesterday, plus it closed above the 50-day EMA again. Gaps get filled, we know that, but once they get filled the top of an overhead gap can act as resistance. There is another gap that could demand attention, but the overseas markets are struggling and seeing some technical breakdowns.
Take a look at some of the major financial companies from Europe. These charts do not look good, but what it means for the U.S. remains to be seen.
The AGG (Bonds / F-fund) pulled back slightly and filled a small open gap. The rising support is holding and bonds remain viable.
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Thanks for reading. We'll see you back here tomorrow.
Tom Crowley
Posted daily at www.tsptalk.com/comments.php
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