Stocks opened higher but it looked like the bears were going to make a their move around noon as the gains vanished. But something lit a fire under the marker in afternoon trading and the indices trended higher for the next four hours and into the close. The Dow ended with a gain of 217-points.
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Investors seem to be shrugging off earnings misses because, with the economy slowing, it seems the Fed will be unable to raise rates and that makes stocks seem like the only game in town for money managers. There's no real return anywhere else. In theory this strategy should implode, but in the interim, when folks are buying, stocks go up. How long that lasts, we don't know.
The price of oil also reversed higher coming well off some sharp early losses. I continue to try to find the correlation between stocks an oil but it hasn't been consistent lately.
The SPY (S&P 500 / C-fund) closed above the 200-day EMA for the second time this week. Whenever the 200-day EMA is in play, I like to look at the SMA (Simple Moving Average) as well since others look at it too. It is currently 2 SPY points away. The 50-day EMA was broken several days ago and has now held for 7 straight days, and that's a good sign. There's a little resistance at the current level connecting the two prior highs. 
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Dow Completion Index (small caps / S-Fund) popped yesterday but unlike the SPY, the small caps remain below the 50-day EMA and some overhead longer-term resistance lines. The open gaps on all of the TSP fund indices remain open.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Dow Transportation Index found support at the 50-day EMA but remains below the bear market barriers in the form of the 200-day EMA and the long-term descending resistance line.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The EFA (EAFE Index / I-fund) gapped up and may be creating a inverted head and shoulders pattern. The thing about head and shoulders patterns, whether traditional or inverted, is that they tend to be continuation patterns. In a bull market an inverted head and shoulders pattern in very bullish, but not necessarily in a bear market / downtrend. That 62 to 63 level becomes very important here.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The price of crude oil was down sharply early Thursday but it closed higher creating a positive reversal day. What this means exactly, I don't know. Perhaps it is just short-term noise but trying to find a correlation between oil, the stock market, and the economy has been erratic lately. The fact that the old resistance line acted as support yesterday looks bullish for oil, but I just don't know how the stock market is interpreting this anymore. Yesterday it seemed to like strong oil.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The AGG (bonds / F-fund) was down slightly but remains in an uptrend. Stock market investors may want to ask themselves why bonds remain buoyant. If stocks are going to go up from here, you would thinks bonds would start to show some weakness.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
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Thanks for reading. Have a great weekend!
Tom Crowley
Posted daily at www.tsptalk.com/comments.php
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