Oil continues to spiral downward and investors have been using it as an indication, or an excuse, to sell. The energy sector is being taken down and being a major part of many indices, we are seeing a broad sell-off. The Dow lost 310-points on Friday and we saw losses near 2% across the board.
The Fed's FOMC meeting is Tuesday and Wednesday of this week with the Fed policy statement announced on Wednesday afternoon when we could see some fireworks.
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Bonds were recipient of the safe money play on Friday, and with the losses in stocks, the G-fund becomes the top performing TSP fund in 2015.
Here are last week's returns showing the recent damage in stocks.
December is normally a good month for stocks but the strong holiday seasonality hasn't kicked in yet. Today is trading day #10 and we don't really see the positive bias kick in until the 12th trading day, or more emphatically, the 15th trading day since the 12th and 13th are average at best.
Chart provided courtesy of www.sentimentrader.com, analysis by TSP Talk
Of course there are no guarantees that we get a Santa Claus rally, but bull or bear market, it's rare to see a lot of selling in late December, although in recent years the last trading day in December has been rather weak.
The SPY (S&P 500 / C-Fund) fell through the 200-day EMA on Friday, and landed at the bottom of the short-term descending trading channel. Volume was high but not panicky levels. If the downside wants to continue, the areas we will be looking for support are at the rising support line, and then the top and bottom of the open gap. There is also a new small open gap near 205.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The weekly chart shows the S&P 500 falling back below the 50-week EMA, after closing above it for three straight weeks.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Dow Completion Index (small caps / S-Fund) filled its open gap from early October, broke below the November lows, and remains is a sharp descending trading channel.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Dow Transportation Index has continued to struggle and after leading the market down over the summer, looks to be trying to do the same now. This index refused to come out of a bear market status and after failing again at the 200-day EMA just a couple of weeks ago, it shows us why we should expect bearish results when in a bear market. It's a hair away from testing the summer lows, and if this breaks down, watch out. With the Transports and the price of oil falling, it is almost certainly indicating that the economy is faltering. Although I did hear the consumer has been spending at a pretty good pace early in this holiday season.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The price of oil fell over 3% again on Friday and it is now testing the 2009 financial crisis lows. The falling wedge we are seeing could indicate we are nearing a low but a failure at $34 would be a technical break down.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The EFA (EAFE Index / I-Fund) filled its open gap from October while opening a new one above 59.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The HYG High Yield Bond Fund broke down sharply on Friday but it did close well off the low. The bear flag breakdown in October triggered a low so we'll see if this stock market leader can find some footing here.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The AGG (Bonds / F-Fund) rallied on the weakness in stocks despite an impending interest rate hike. Bonds tend to go down when rates go higher but this was a safety play.
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 www.tsptalk.com/comments.php
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