Stocks were down slightly on Monday on light volume. We saw a big rally to end the week last week, so it's not a surprise to see some profit taking. The question of course is, how far will investors take any pullback, if there is a measurable one at all?
There is an FOMC meeting on Wednesday and while most believe there will be no change made to interest rates, there could be clues to whether or not they will push them off until 2016, or if they will consider a December hike. Obviously it could be a market mover.
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Small caps lagged again as they struggle to breakout in any meaningful way like their large caps siblings.
The SPY (S&P 500 / C-fund) dipped yesterday and will likely fill the small open gap created on Friday. Whether it pulls back to the 200 or 50-day EMAs remains to be seen, but a little profit taking here would make sense.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Dow Completion Index (small caps / S-Fund) remains in the inverted head and shoulders pattern, below the neckline and the 50-day EMA.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The EFA (EAFE Index / I-fund) remains below the 200-day EMA, but above the old resistance line. It looks like an interesting fork in the road.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
These next two weekly charts from 2010 and 2011 show how prior corrections (or severe pullbacks) played out in the weeks ahead, and then we'll compare it to this year's correction.
In 2010 stocks pulled back, rebounded, tested the lows, moved higher again peaking 4 -weeks later, then saw one more moderate pullback before the rally resumed.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
In 2011 we got a clean correction, a snap-back rally, a test of the lows, another rally off the test that peaked a few weeks later, and then one more moderate pullback before the upside resumed.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
Here we are in 2015 where we saw a correction, a relief rally, a test of the lows, another rally that has now lasted for 3-weeks. Comparing the two above, it seems possible that a moderate pullback could manifest in the next week or so before the upside resumes.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The AGG (bonds / F-fund) was up slightly as stocks dipped. Not much to report here except a small gap was filled and bonds remain in an uptrend.
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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