Yesterday was a whipsaw day with a better than expected CPI report turning negative pre-market futures into a big positive open for stocks. The Dow closed down 30-points, which was well off the 322-point decline we saw at the midday lows. The S&P 500 was up 35-points early on, or almost 1%, but it gave that back and much more before it crawled its way back into positive territory, then regained some upside momentum in the late afternoon trading. Bonds were up and a decline in yields.
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The dollar was down but the early selling after the opening bell in the US set the tone for the overseas markets that closed before the US stocks came roaring back later in the day, leaving the I-fund in the red.
We still have a couple of important charts that can't seem to repair their bearish trends and resistance. The Dow Transportation Index probably has to get back into shape otherwise it will be tough for the general market to stay healthy. It's below its moving averages and the descending resistance line. We saw a possible double bottom and a possible bull flag forming, but that resistance means more.
Same for the small caps of the Russell 2000 Index. There's a lot going on in these charts with a possible inverted head and shoulders, which would be bullish IF they can break above the longer-term resistance lines, and the IWM did make some progress with that yesterday, despite stalling at the 50-day EMA. The optimist might look at these charts and see higher lows perhaps creating a successful bottom, but that is basically part of the definition of a bear flag, which is also a possibility here. It's those regional banks that are putting the pressure on the small caps as the KRE regional bank index was down another 1% yesterday.
I keep wondering if those weaker charts will dictate what the rest of the market does, or if a chart like the Nasdaq will be the leader and pull those other charts out of their doldrums. It finally broke above resistance and may be breaking out of that cup and handle formation.
The Yield on the 10-year Treasury was down sharply as the choppy consolidation continued. The 50-day EMA is holding as resistance and the double bottom support continues to hold as well. Another bearish flag?
The dollar was down a bit as it fell back into its channel and flag-like formation. There's a lot of small formations within this chart that can be looked at as half full or half empty. The stock market and investors are probably mixed on whether they want this to break up, or down. A move up might weigh on stock prices, but it would likely go up if the economy continues to show resilience.
Disney reported earnings after the bell yesterday and was trading down 4% after hours so that could weigh on the Dow today.
The S&P 500 (C-fund) was up big early, down quite a bit later, then battled back to close positive, although off the morning highs. In the process it did create a generally bullish positive outside reversal day, which often leads to some additional short term upside. An outside reversal day is when the daily candlestick's low is lower than the previous day's low, and the high is higher than the previous day's high. Then it needed to close above the prior day's high, so it fit that "outside" criteria. With a lot of overhead resistance still on this chart, that bullish short-term tendency has some obstacles. You can see other positive "kangaroo tail" reversals have led to further upside.
DWCPF (S-fund) had a nice gain but it hit that 50-day EMA like a brick wall and pulled back again. On the bright side, it did close above the longer-term descending resistance line off the February peak. There's an open gap down by about 1610, so we may know soon enough if the broken resistance line can now act as support.
The EFA (I-fund) was down on the day but it did create a positive reversal day - although not an outside reversal. The early selling did fill a small gap by 73 and the 20-day EMA before it reversed back up. That megaphone formation is like a bull / bear flag, or even a head and shoulders pattern in that they tend to break in the direction of the previous trend. This one is bullish, but that doesn't mean it can't come back to retest the bottom of that megaphone one more time. Yesterday's positive reversal day suggest another test of the top of the formation may be coming.
BND (Bonds / F-fund) rallied as once again the 50 and 200-day EMA have held on a pullback. It's churning as investors battle each other, positioning themselves for either a weakening economy where yields would likely go lower, or higher yields if inflation picks up again.
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 so much for reading. We'll see you 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 dollar was down but the early selling after the opening bell in the US set the tone for the overseas markets that closed before the US stocks came roaring back later in the day, leaving the I-fund in the red.
We still have a couple of important charts that can't seem to repair their bearish trends and resistance. The Dow Transportation Index probably has to get back into shape otherwise it will be tough for the general market to stay healthy. It's below its moving averages and the descending resistance line. We saw a possible double bottom and a possible bull flag forming, but that resistance means more.
Same for the small caps of the Russell 2000 Index. There's a lot going on in these charts with a possible inverted head and shoulders, which would be bullish IF they can break above the longer-term resistance lines, and the IWM did make some progress with that yesterday, despite stalling at the 50-day EMA. The optimist might look at these charts and see higher lows perhaps creating a successful bottom, but that is basically part of the definition of a bear flag, which is also a possibility here. It's those regional banks that are putting the pressure on the small caps as the KRE regional bank index was down another 1% yesterday.
I keep wondering if those weaker charts will dictate what the rest of the market does, or if a chart like the Nasdaq will be the leader and pull those other charts out of their doldrums. It finally broke above resistance and may be breaking out of that cup and handle formation.
The Yield on the 10-year Treasury was down sharply as the choppy consolidation continued. The 50-day EMA is holding as resistance and the double bottom support continues to hold as well. Another bearish flag?
The dollar was down a bit as it fell back into its channel and flag-like formation. There's a lot of small formations within this chart that can be looked at as half full or half empty. The stock market and investors are probably mixed on whether they want this to break up, or down. A move up might weigh on stock prices, but it would likely go up if the economy continues to show resilience.
Disney reported earnings after the bell yesterday and was trading down 4% after hours so that could weigh on the Dow today.
The S&P 500 (C-fund) was up big early, down quite a bit later, then battled back to close positive, although off the morning highs. In the process it did create a generally bullish positive outside reversal day, which often leads to some additional short term upside. An outside reversal day is when the daily candlestick's low is lower than the previous day's low, and the high is higher than the previous day's high. Then it needed to close above the prior day's high, so it fit that "outside" criteria. With a lot of overhead resistance still on this chart, that bullish short-term tendency has some obstacles. You can see other positive "kangaroo tail" reversals have led to further upside.
DWCPF (S-fund) had a nice gain but it hit that 50-day EMA like a brick wall and pulled back again. On the bright side, it did close above the longer-term descending resistance line off the February peak. There's an open gap down by about 1610, so we may know soon enough if the broken resistance line can now act as support.
The EFA (I-fund) was down on the day but it did create a positive reversal day - although not an outside reversal. The early selling did fill a small gap by 73 and the 20-day EMA before it reversed back up. That megaphone formation is like a bull / bear flag, or even a head and shoulders pattern in that they tend to break in the direction of the previous trend. This one is bullish, but that doesn't mean it can't come back to retest the bottom of that megaphone one more time. Yesterday's positive reversal day suggest another test of the top of the formation may be coming.
BND (Bonds / F-fund) rallied as once again the 50 and 200-day EMA have held on a pullback. It's churning as investors battle each other, positioning themselves for either a weakening economy where yields would likely go lower, or higher yields if inflation picks up again.
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 so much for reading. We'll see you 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.
