Stocks rallied back on Wednesday as the Dow jumped 457-points on the day, but it felt more like a light volume relief rally after the more than 1200-point combined loss on Monday and Tuesday. With the VIX still over 40, these 2% to 4% moves have become the norm so it doesn't mean too much right now. The price of oil rallied back, but the index charts still have some problems and look vulnerable, although more upside action could change that.
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The price of Oil rallied almost 20% yesterday after the recent breakdown, and that gave the stock market some some good news after the two days of selling. However, the rally still left it about $6 below the old support line so its certainly not out of trouble yet.
Now that the rising support line and the 50-day EMA have been broken, we have to be on the lookout for what we talked about yesterday. That is, the big rallies that can get us leaning the wrong way. We saw plenty of monster rallies in March (green arrows) only to be followed by another leg lower for a couple of days. That makes today very important.
Failed breakouts or breakdowns aren't uncommon, which is why we like to talk about 3 to 5 days to confirm one. Yesterday was day #2 for the S&P 500 closing below the rising support line of the relief rally. The prior two breaks - the breakdown in February and the breakout in early April, triggered huge moves, and like Monday's breakdown, they also created open gaps.
Yesterday's rally actually filled Monday's gap already so the bears, if they have the courage, may have their opportunity to keep the pressure on the bulls right away, now that support has been broken.
Despite everything I said, which has me leaning on the bearish side for stocks, I can't help think that the market is going to fool the most people that it can. I think the surprise move from here would be more upside rally, so even though I'm not positioned that way, and the charts would indicate otherwise, it wouldn't surprise me to see stocks fool me again and move higher. I hope I'm wrong about that.
Tomorrow's (Friday) commentary may be a quick one as I will be out of the office starting Thursday afternoon. I'm taking a long weekend to break up the monotony and get outside. I'm usually a homebody and don't mind being home or in my office for long periods of time, but once the golf courses closed in my state, I started to feel the weight of the shutdown. So, I'm heading to see family in a state that still allows golfing, and hopefully that will clear some of the cobwebs over the weekend.
The S&P 500 (C-fund) rallied up on light volume on Wednesday to test the old, broken support line, and the 50-day EMA, but so far that old support is holding as resistance. The 20-day EMA held on the first pullback test last week, so it looks like the 2730 and 2800 areas are the key pivot points to determine if this recent rally resumes, or if the bears are going to make another push toward the March lows.
The DWCPF / S-fund gained nearly 2% on the day, which sounds great, but that followed the more than 4% loss the prior two days. Still, the sideways movement is actually somewhat encouraging as it may be consolidating in that bullish flag-like formation (blue) as the rising support line comes up to meet it. 1100 and 1200 seem to be the keys here.
The Dow Transportation Index did not participate in the rally yesterday as it closed just south of flat after having broken below its bear flag earlier in the week. CSX Corp., which is a railroad stock, was up over 2% in afterhours trading after reporting earnings, so perhaps it can find some buyers today. But this chart doesn't look great.
The EFA / I-fund rallied and filled a small gap but there are still some big gaps on the downside, so yesterday's rally could turn out to be a temporary patch. Everything looks set up for another bearish move, but as I said above, the market certainly loves to fool us.
The BND / F-fund was down slightly and it continues to move sideways in a much more orderly fashion than we saw a few weeks ago. The yield on the 10-year Treasury seems to be getting comfortable below 1.0%, and for this to test the old intraday highs from early March, that yield may have to get closer to 0%.
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
Thanks for reading. We'll see you back here tomorrow.
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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[TD][/TD]
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The price of Oil rallied almost 20% yesterday after the recent breakdown, and that gave the stock market some some good news after the two days of selling. However, the rally still left it about $6 below the old support line so its certainly not out of trouble yet.
Now that the rising support line and the 50-day EMA have been broken, we have to be on the lookout for what we talked about yesterday. That is, the big rallies that can get us leaning the wrong way. We saw plenty of monster rallies in March (green arrows) only to be followed by another leg lower for a couple of days. That makes today very important.
Failed breakouts or breakdowns aren't uncommon, which is why we like to talk about 3 to 5 days to confirm one. Yesterday was day #2 for the S&P 500 closing below the rising support line of the relief rally. The prior two breaks - the breakdown in February and the breakout in early April, triggered huge moves, and like Monday's breakdown, they also created open gaps.
Yesterday's rally actually filled Monday's gap already so the bears, if they have the courage, may have their opportunity to keep the pressure on the bulls right away, now that support has been broken.
Despite everything I said, which has me leaning on the bearish side for stocks, I can't help think that the market is going to fool the most people that it can. I think the surprise move from here would be more upside rally, so even though I'm not positioned that way, and the charts would indicate otherwise, it wouldn't surprise me to see stocks fool me again and move higher. I hope I'm wrong about that.
Tomorrow's (Friday) commentary may be a quick one as I will be out of the office starting Thursday afternoon. I'm taking a long weekend to break up the monotony and get outside. I'm usually a homebody and don't mind being home or in my office for long periods of time, but once the golf courses closed in my state, I started to feel the weight of the shutdown. So, I'm heading to see family in a state that still allows golfing, and hopefully that will clear some of the cobwebs over the weekend.
The S&P 500 (C-fund) rallied up on light volume on Wednesday to test the old, broken support line, and the 50-day EMA, but so far that old support is holding as resistance. The 20-day EMA held on the first pullback test last week, so it looks like the 2730 and 2800 areas are the key pivot points to determine if this recent rally resumes, or if the bears are going to make another push toward the March lows.
The DWCPF / S-fund gained nearly 2% on the day, which sounds great, but that followed the more than 4% loss the prior two days. Still, the sideways movement is actually somewhat encouraging as it may be consolidating in that bullish flag-like formation (blue) as the rising support line comes up to meet it. 1100 and 1200 seem to be the keys here.
The Dow Transportation Index did not participate in the rally yesterday as it closed just south of flat after having broken below its bear flag earlier in the week. CSX Corp., which is a railroad stock, was up over 2% in afterhours trading after reporting earnings, so perhaps it can find some buyers today. But this chart doesn't look great.
The EFA / I-fund rallied and filled a small gap but there are still some big gaps on the downside, so yesterday's rally could turn out to be a temporary patch. Everything looks set up for another bearish move, but as I said above, the market certainly loves to fool us.
The BND / F-fund was down slightly and it continues to move sideways in a much more orderly fashion than we saw a few weeks ago. The yield on the 10-year Treasury seems to be getting comfortable below 1.0%, and for this to test the old intraday highs from early March, that yield may have to get closer to 0%.
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
Thanks for reading. We'll see you back here tomorrow.
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.
