Stocks fell apart yesterday as investors don't seem to need much of a reason to sell lately, which is a little troubling. The Dow lost 267-points and again the Nasdaq and small caps took the brunt of the hit.
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For those of you who remember Trader Fred and his very technical reports, this was the kind of market that he stayed away from, but he would have likely been gone for a couple of weeks now. Once we started to see a series of 1% days, in either direction, his system quickly moved to safety.
The SPY (S&P 500 / C-fund) fell below the 20 and 50-day EMAs, as well as the neckline support (red), and as it bounces above and below these key levels, it changes the technical outlook. Certainly volatility has picked up, and as I mentioned above, more defensive systems like Trader Fred's would have gone running already despite the moving averages, but for the last year or so we have become programmed to expect these pullbacks to eventually reverse and make new highs. If things get any worse, we may look back at the charts and ask ourselves how we could have ignored all of these warnings.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Nasdaq 100 (QQQ) gave up all of the prior two day's gains, and then some as it closed at its lowest level since early February. The 20 and 50-day EMAs turned out to be as resistant as a brick wall, and once it failed to move above them, particularly the 50-day EMA, the selling accelerated.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The small caps, and this chart of the Wilshire 4500 represents our S-fund, also fell below this week's lows, but take a look at where it stands now. The support line from the long-term trading channel, going back to 2012, is being tested. It is a positive that it has held so far, but if it breaks down, that 200-day EMA may be next.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The dollar fell again on Thursday and it is now testing a serious support line. It saw a bit of an intraday bounce once it hit support, and you can see that there are open gaps above that may want to get filled before it breaks down.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Bonds rose above their resistance lines, but the IEF (7 to 10 year bond) may have posted a negative reversal day as it tried to get back within the trading range.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
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Thanks for reading! We'll see you back here tomorrow.
Tom Crowley
Posted daily at TSP Talk Market Commentary
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