Stocks shot out of the gate in early trading Monday, and ended the day with modest gains, but some late weakness took a little steam out of the rally and the indices closed well of their highs. The Dow did gain 104-points, but had been up nearly 200 earlier. Bonds were down slightly.
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The action created a possible negative reversal day, but any follow-through weakness may be short-lived if the new rising trading channels hold, as you'll see on the charts.
The SPY (S&P 500) pushed to new highs and actually posted its highest closing price - ever. That's a good sign for the market looking out longer-term, but in the short-term it is overbought and may start to feel some pressure. The support from the new rising trading channel (blue) may be our best clue. If that breaks we'll probably get a meaningful pullback. But until then, we'd just be guessing.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Nasdaq is in new high territory after posting a 0.7% gain yesterday. This leading index may be the first to top, but there is still room above before it hits resistance.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The small caps were up big early on Monday morning and the Russell 2000 finally hit tested January highs before backing off rather sharply, but its rising trading channel is still intact and that support line is key for the short-term rally.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Transportation Index was having a very big day as well, but it may have produced the largest negative reversal day of all the major indices. The overhead gap is still a force to be reckoned with, so I don't think there will be too much downside follow-through here. But once that gap is filled, all bets are off for the bullish side - assuming it happens is the near future.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Bonds are putting me to sleep but that probably means a big move is on the horizon. I just wish I knew which way that move will be. My guess? Down, since gold and stocks look so bullish right now.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
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Thanks for reading! We'll see you tomorrow.
Tom Crowley
Posted daily at TSP Talk Market Commentary
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