Stocks opened lower on Tuesday and stayed down all day. The Dow ended the day with a 96-point loss, which sounds worse than being down 0.57%. The small caps took the brunt of yesterday's losses with the Russell 2000 dropping 1.2%.
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The I-fund lost 0.6% and bonds were also down.
The bulls seem to have taken a couple of days off here lately and the S&P 500 fell to a level not seen since August 20. The SPY (S&P 500 / C-fund) tested and held the 20-day EMA and the 199 level we have watched closely. The PMO indicator looks to be ready to rollover.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
I posted this next chart yesterday as one to keep an eye on since the current pattern is doing a good job of rhyming with the action in early 2014. In March, April, and May, after a breakout above 1850, the S&P traded in a range between 1850 and about 1885, with a few false breakouts / breakdowns, before resuming the upside. That's what we may want to be on the look out for here - fake outs. Yesterday's action pushed the S&P 500 below the breakout point so we'll have to give it a couple of days to see if it is for real, or just one of those fake outs.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Wilshire 4500 (S-Fund) fell below the 20-day EMA and is now testing a interesting area of possible support which saw a couple of short-term peaks at this level back in June and July, and then in August it took 5 days to close above it. A small head and shoulder pattern has formed going back to August 25. They are generally bearish patterns when stocks are in a downtrend, but not when the trend is up and in a bull market. In that case they can be continuation patterns. It's an interesting juncture for the Wilshire.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Russell 2000 fell to the 50-day yesterday and will begin Wednesday testing that important moving average. The rising trading channel has broken and and it has now closed below that support line for three straight days. That's a warning sign and the 50-day EMA could be the next if it doesn't hold.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The EFA (EAFE Index) fell sharply again, but did manage close off the lows and lost "only" 0.29%. That's two days below support and the 50-day EMA. The dollar continues to play a big role here and this chart looks like a series of lower highs and lower lows. The question is, if the dollar stops rising, can the EAFE stop going down or will it make another lower low?
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The IEF (Bonds / F-fund) broke down below the old breakout level near 103.75, and the 50-day EMA. It is now testing a rising support line line that isn't quite as strong as the support it just fell through.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The AGG bond fund is down testing the 50-day EMA so I posted this chart for more clues to where the F-fund may want to go. Is this the start of a breakdown in bonds, or is this where they find support? To be continued.
Chart provided courtesy of www.stockcharts.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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