Stocks pulled back sharply on Thursday as the action remains choppy. It looked like we were going to see a breakdown, and we did intraday, but the SPY actually closed higher yesterday than it did on Tuesday, after a successful test of the 50-day EMA. The Dow lost 168-points, which was almost 100-points off the lows, if that's any consolation. The large tech stocks took another major hit and that's concerning.
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The TSP offices will be closed on July 4th so they will not be processing IFT's, and the markets will only be open for a half day on Monday the 3rd. That usually means a slow day of trading but because we can make IFT's that day there could be some action. Our commentaries may be brief however, depending on Friday's market action and the futures markets on Sunday night.
It was interesting to see that the worst performing stocks yesterday were some of the best performers in 2017 which suggests that it may have been some repositioning involved in the selling as we wrap up the 2nd quarter. That brings up the question of whether Wednesday's big rally was part of that repositioning, or is that still to come today, the last day of the quarter? The holiday trading will likely mean volumes will shrink so the moves could actually widen as liquidity dries up. It depends what the big money wants to do as they will be able to push the indices around more easily during holiday trading and perhaps help manipulate (maybe too string) their quarterly reports to some extent.
The Nasdaq 100 continues to be the big mover as the 2017 high flying FAANG stocks are still taking hits, which is part of the repositioning. Volume did spike some on this index and that can tend to happen near market turns, but it could also be part of the end of the quarter window dressing.
So we saw day -4 (on chart below) on Wednesday perform well, and day -3 pullback, just as the holiday chart might suggest. Possibly coincidence, but we'll see as the numbers get more positive again going forward. The question is, even if this market is about to roll over, will the positive seasonal bias hold it up for a few more days?
Chart provided courtesy of www.sentimentrader.com
Administrative note: Thanks to all of you who took the Survey regarding video. It was interesting that most of those who responded late Wednesday when I first posted the survey, were leaning heavily toward videos. By the morning that had turned around sharply and it turned out that 56% either somewhat or strongly preferred the written commentary, while 32% somewhat or strongly preferred a video.
As I said I would be trying to cut down on the time it takes to produce the reports with these videos, so obviously I wouldn't want to do both. That means I will likely stick to the written reports.
One member commented that I may have not made it clear that I would be recording my PC screen and doing the technical analysis right there on the charts on the video. It's not like you'd have to see my mug on the camera.
Just charts with a voice-over talking about them.The SPY (S&P 500 / C-fund) tanked on Thursday but found some support and rebounded at the 50-day EMA and the bottom of what may turn out to be a parallel trading channel. Sometimes these support areas hold on the first test but not on ensuing tests, but this year we have seen the bulls ready to buy, time after time, at these key levels. The F flag (blue) did break down so now it may be a battle of the rising support, and potential resistance from the bottom of that F flag. The market seems to be having a bit of a change in character as the tech leaders begin faltering, but again the bulls have been consistent during these pullbacks since the election, which was nearly 8-months ago.
The DWCPF (S-fund) lost 0.75% on the day but again there was a fairly major midday reversal after a bounce off of support. That 1215 area has held all month and that may be the key level for this index.
The Dow Transportation Index held up relatively well by comparison, losing 0.38% on the day. Again, we're seeing the dip buyers show up at support, but resistance is holding as well as the two converge.
The EFA (EAFE Index / I-fund) rallied a little toward the close but still closed below key support. We saw some pretty nasty breakdowns in the European markets, but they closed before the U.S. market started to come back, and we see that the EFA, which trades with U.S. stocks, did see that mini-rebound.
The rally in the dollar (UUP) stalled at the descending resistance line a last week and it has gone straight down since. Now it is flirting with the descending support line so the question is about it holding or not.
The AGG (Bonds / F-fund) filled one of its open gaps as bonds opened much lower on Thursday. Like stocks, bonds closed well off the lows and above some longer-term support. That support could be a key for both stocks and bonds because if bonds go lower (and yields go higher) it becomes more attractive to take the higher yields than remain in risky stocks. At least that's how some investors think.
Read more in today's TSP Talk Plus Report. We post more charts, indicators and analysis, plus discuss the allocations of the TSP and ETF Systems. For more information on how to gain access and a list of the benefits of being a subscriber, please go to: www.tsptalk.com/plus.php
Thanks for reading. Have a great weekend!
Tom Crowley
Posted daily at www.tsptalk.com/comments.php
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