Stocks opened lower on Thursday, but once again battled back as the bears have not yet been able to stick a fork in this rally. The Dow lost just 20-points after being down 95 early, but the small caps were down more sharply, and strength in the dollar yesterday hurt the I-fund.
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There are many signs that this market is overbought and due for a pullback, but someone forgot to tell investors as they continue to buy every little dip. A little consolidation would be healthy, but this market seems to want to make a new high and the bears just may have to wait a little longer. Seasonality is on the bulls' side this summer in an election year, but that doesn't mean stocks will go straight up. But trying to time this market could be tricky since the dip buyers have been quick to react.
The SPY (S&P 500 / C-Fund) lost 0.14% yesterday, remains above the April high, but is playing in a bit of a danger zone near the apex of a rising wedge pattern. There are so many pluses and minuses that it's tough to make any call, and believe me, we are not the only ones who find this market tough to call here.
The DWCPF (S-fund) was hit harder than the S&P yesterday, and closed just below it rising trading channel which could be a warning sign. A pullback to test the old breakout level near 1032, would be normal behavior after a breakout, although that would be about a 1.7% loss from the current level.
The Dow Transportation Index was down sharply early on Thursday, but it rallied back to make it a more modest loss which created a positive reversal day. We've sure have seen a lot of reversal days lately. Yesterday's (Thursday) high may have hit some possible resistance.
The EFA (I-fund) gapped down on Thursday as the dollar rallied overnight. The move lower filled two open gaps (blue) while opening another (red), and there is another gap still open below 57.50. Although filling gaps makes things cleaner, the bulls will want to keep this above the 200 and 50-day EMAs.
The Credit Suisse High Yield Bond Fund continues to make new highs, and this is one of the reasons that stocks have remained buoyant.
The AGG (Bonds / F-fund) rallied early but much of those gains were given back leaving it up just slightly on the day. It's not that common to see a large gap on the bond charts stay open for very long.
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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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