Stocks pulled back on Thursday, and in most cases the charts were dealing with overhead resistance, so after a dramatic 5 day rally, it was time for a break. The Dow lost 192-points, or 0.54%, and most of the indices saw similar losses. Small caps, which had been getting hot again, was the laggard on the day, but the S-fund had been up almost 5% in the prior 4 days. Bonds were flat and the dollar was up.
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Current events gave investors a good excuse to lock in some gains after the 4 - 5 day rally. The trouble in Afghanistan, along with the anticipation of Fed Chair Jerome Powell's speech today at the Jackson Hole Symposium, all while many of the major market indies were at new highs, was reason enough to back off for a day, but certainly no damage has been done. I think the question is only whether we see another modest pullback to the moving averages, or if this will be one of those dip buyer specials that last just a day or two.
Internally it was ugly, but it had been so strong for several days that it's not a surprise to get a day like this.
The Yield on the 10-year Treasury was up early, but faded to close flat after testing the early July high. On the other hand you can see in the chart that a day after it moved above the 50 and 200-day EMAs, the yield moved above the blue descending resistance line. Overall this is technically a plus for economic prospects from the bond market, but it is not out of the woods just yet as the red bearish looking flag is still in play.
The dollar rallied fairly strongly and with open gaps both above and below, the short term could easily go either way. The current trend is up with firm support in the 24.8 - 24.9 area.
And the reason we care of course is that a rising dollar tends to put pressure on prices, and a falling dollar pushes prices higher. You can see that the dollar's closing peak was last Thursday, August 19, and since then stocks have rallied sharply, until yesterday when the dollar rallied.
The S&P 500 (C-fund) pulled back from its recent highs, and the open gap below 4450 may be a potential downside target, if the dip buyers allow it to get that low. The push off the resistance line is reminiscent of the bull flag created in July. It may be tough to see, but the PMO indicator is back below its moving average, a minor red flag at this point.
The DWCPF (S-fund) took a still hit yesterday, but it had come a long way since last week's positive reversal off of the support line. I've noted the two open gaps before, and I would guess that at least one of those would get filled before any attempts at the old highs.
The EFA (EAFE Index / I-fund) posted a modest loss and yesterday's low was at the top of the large open gap. There's a lot of support 79.50 area so it may be best if that gap gets filled - just to get it over with. Any move below that support would be trouble.
The Dow Transportation Index flipped over to give back Wednesday's gains, and it closed below the 50-day EMA, which it has been dancing above and below recently. The longer this lingers without breaking out to the upside, the more the bears will put the pressure on. That still looks like a possible bear flag.
The price of oil, which is generally a good indication of economic strength, rallied along with stocks recently but may be backing off from the 50-day EMA again as the downtrend off the early July peak remains intact.
The BND (bonds / F-fund) was flat after falling early but bouncing once again off that 50-day average. That is a bear flag for sure, so while we could see a bounce within the flag, for the technical set up is for an eventual breakdown.
Read more in today's TSP Talk Plus Report. We post more charts, indicators and analysis, plus discuss the allocations of the TSP and ETF Systems. For more information on how to gain access and a list of the benefits of being a subscriber, please go to: www.tsptalk.com/plus.php
For more info our other premium services, please go here... www.tsptalk.com/premiums.html
To get weekly or daily notifications when we post new commentary, sign up HERE.
Thanks for reading. Have a great weekend!
Tom Crowley
Posted daily at www.tsptalk.com/comments.php
The legal stuff: This information is for educational purposes only! This is not advice or a recommendation. We do not give investment advice. Do not act on this data. Do not buy, sell or trade the funds mentioned herein based on this information. We may trade these funds differently than discussed above. We use additional methods and strategies to determine fund positions.
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Current events gave investors a good excuse to lock in some gains after the 4 - 5 day rally. The trouble in Afghanistan, along with the anticipation of Fed Chair Jerome Powell's speech today at the Jackson Hole Symposium, all while many of the major market indies were at new highs, was reason enough to back off for a day, but certainly no damage has been done. I think the question is only whether we see another modest pullback to the moving averages, or if this will be one of those dip buyer specials that last just a day or two.
Internally it was ugly, but it had been so strong for several days that it's not a surprise to get a day like this.
The Yield on the 10-year Treasury was up early, but faded to close flat after testing the early July high. On the other hand you can see in the chart that a day after it moved above the 50 and 200-day EMAs, the yield moved above the blue descending resistance line. Overall this is technically a plus for economic prospects from the bond market, but it is not out of the woods just yet as the red bearish looking flag is still in play.
The dollar rallied fairly strongly and with open gaps both above and below, the short term could easily go either way. The current trend is up with firm support in the 24.8 - 24.9 area.
And the reason we care of course is that a rising dollar tends to put pressure on prices, and a falling dollar pushes prices higher. You can see that the dollar's closing peak was last Thursday, August 19, and since then stocks have rallied sharply, until yesterday when the dollar rallied.
The S&P 500 (C-fund) pulled back from its recent highs, and the open gap below 4450 may be a potential downside target, if the dip buyers allow it to get that low. The push off the resistance line is reminiscent of the bull flag created in July. It may be tough to see, but the PMO indicator is back below its moving average, a minor red flag at this point.
The DWCPF (S-fund) took a still hit yesterday, but it had come a long way since last week's positive reversal off of the support line. I've noted the two open gaps before, and I would guess that at least one of those would get filled before any attempts at the old highs.
The EFA (EAFE Index / I-fund) posted a modest loss and yesterday's low was at the top of the large open gap. There's a lot of support 79.50 area so it may be best if that gap gets filled - just to get it over with. Any move below that support would be trouble.
The Dow Transportation Index flipped over to give back Wednesday's gains, and it closed below the 50-day EMA, which it has been dancing above and below recently. The longer this lingers without breaking out to the upside, the more the bears will put the pressure on. That still looks like a possible bear flag.
The price of oil, which is generally a good indication of economic strength, rallied along with stocks recently but may be backing off from the 50-day EMA again as the downtrend off the early July peak remains intact.
The BND (bonds / F-fund) was flat after falling early but bouncing once again off that 50-day average. That is a bear flag for sure, so while we could see a bounce within the flag, for the technical set up is for an eventual breakdown.
Read more in today's TSP Talk Plus Report. We post more charts, indicators and analysis, plus discuss the allocations of the TSP and ETF Systems. For more information on how to gain access and a list of the benefits of being a subscriber, please go to: www.tsptalk.com/plus.php
For more info our other premium services, please go here... www.tsptalk.com/premiums.html
To get weekly or daily notifications when we post new commentary, sign up HERE.
Thanks for reading. Have a great weekend!
Tom Crowley
Posted daily at www.tsptalk.com/comments.php
The legal stuff: This information is for educational purposes only! This is not advice or a recommendation. We do not give investment advice. Do not act on this data. Do not buy, sell or trade the funds mentioned herein based on this information. We may trade these funds differently than discussed above. We use additional methods and strategies to determine fund positions.
