Stocks got off to a good start on Tuesday but the highs were made near the opening bell and we saw drift lower into the close, and the end result was some small losses. The Dow lost 82-points and percentage-wise, that's what we saw in most indices although small caps did a pump and dump as the Russell 2000 rallied 1% early, then flipped over to lose 1% on the day. Bonds rallied and the dollar was down yet again.
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The situation remains the same - we're seeing some indices hold up well while others lag and yesterday if there was one change it was that the Nasdaq held up rather well by being flat on the day while the small caps had a rough day. They had been running almost side by side for a few weeks with the S&P 500 and EFA (I-fund) outperforming each of them. The EFA (I-fund) actually made a new intraday high yesterday, but reversed to close basically flat on the day. The I-fund price was a gift that may have to be given back today.
But it's those small caps that I have been worried about and yesterday's action reiterated that concern as it turned a strong rally right at the opening bell, only to reverse down hard by the close and the Russell 2000 ended with a loss near 1%. That was likely an effort to take out stops from any short positions.
The highs and lows on that chart yesterday were above and below Monday's highs and lows respectively, and the fact that it closed near the lows of the days makes it a negative outside reversal day, and they typically lead to more short-term downside.
The small caps of the S-fund didn't do quite as poorly because that fund incorporates some larger midcap stocks that are not in the Russell 2000. But both the Russell and the S-fund charts fell back below their 50-day EMAs and continue to sport bear flag formations.
I wouldn't call the action bearish in the overall market, but the small caps certainly have the set up that could turn it quite bearish so I'd be careful there.
Bonds rallied and they continue to baffle me. Yields generally rise (bond prices fall) in growing economic environments, but it has now been two months since the 10-year yield has made a new high, and yesterday it fell through the 50-day EMA, and closed below it for the first time since September. Is the economy not as strong as we think?
The S&P 500 (C-fund) opened higher, hit near the old broken support line and rolled over. No technical damage was done but that resistance line is obviously still holding - although it is also still rising. The 4200 level continues to be a tough nut to crack and any further upside above 4200 would be near a double top test.
The DWCPF (S-fund) remains in its bear flag and the negative outside reversal yesterday did nothing to help its cause.
The EFA / I-fund actually made a new all time high early yesterday before it stalled and pulled back below the May 10th high. It's near the top of its recent range with a lot of room below to the support area, so we'll see if this can hit the top of the channel before potentially pulling back toward the middle of it. The I-fund price was overdone because of the late selling. Some of that should be taken back today.
The Dow Transportation Index was down about 1% yesterday and it created a negative outside reversal formation, and that old support line continues to act as resistance, although it is rising like some of the other broken channels we've talked about.
BND (F-fund) rallied again, and as I talked about above, I'm not sure why unless the bond market is not seeing such a rosy picture for the economy. It could just be another test of the 200-day moving average, because that, and the bottom of the old channel, looks to be where it is heading.
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. 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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The situation remains the same - we're seeing some indices hold up well while others lag and yesterday if there was one change it was that the Nasdaq held up rather well by being flat on the day while the small caps had a rough day. They had been running almost side by side for a few weeks with the S&P 500 and EFA (I-fund) outperforming each of them. The EFA (I-fund) actually made a new intraday high yesterday, but reversed to close basically flat on the day. The I-fund price was a gift that may have to be given back today.
But it's those small caps that I have been worried about and yesterday's action reiterated that concern as it turned a strong rally right at the opening bell, only to reverse down hard by the close and the Russell 2000 ended with a loss near 1%. That was likely an effort to take out stops from any short positions.
The highs and lows on that chart yesterday were above and below Monday's highs and lows respectively, and the fact that it closed near the lows of the days makes it a negative outside reversal day, and they typically lead to more short-term downside.
The small caps of the S-fund didn't do quite as poorly because that fund incorporates some larger midcap stocks that are not in the Russell 2000. But both the Russell and the S-fund charts fell back below their 50-day EMAs and continue to sport bear flag formations.
I wouldn't call the action bearish in the overall market, but the small caps certainly have the set up that could turn it quite bearish so I'd be careful there.
Bonds rallied and they continue to baffle me. Yields generally rise (bond prices fall) in growing economic environments, but it has now been two months since the 10-year yield has made a new high, and yesterday it fell through the 50-day EMA, and closed below it for the first time since September. Is the economy not as strong as we think?
The S&P 500 (C-fund) opened higher, hit near the old broken support line and rolled over. No technical damage was done but that resistance line is obviously still holding - although it is also still rising. The 4200 level continues to be a tough nut to crack and any further upside above 4200 would be near a double top test.
The DWCPF (S-fund) remains in its bear flag and the negative outside reversal yesterday did nothing to help its cause.
The EFA / I-fund actually made a new all time high early yesterday before it stalled and pulled back below the May 10th high. It's near the top of its recent range with a lot of room below to the support area, so we'll see if this can hit the top of the channel before potentially pulling back toward the middle of it. The I-fund price was overdone because of the late selling. Some of that should be taken back today.
The Dow Transportation Index was down about 1% yesterday and it created a negative outside reversal formation, and that old support line continues to act as resistance, although it is rising like some of the other broken channels we've talked about.
BND (F-fund) rallied again, and as I talked about above, I'm not sure why unless the bond market is not seeing such a rosy picture for the economy. It could just be another test of the 200-day moving average, because that, and the bottom of the old channel, looks to be where it is heading.
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. 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.
