Stocks opened higher on Wednesday but it didn't take long for the bears to push the indices back down and into negative territory. They kept the pressure on for most of the day but there was some buying into the close and the Dow, which was down about 200-points at one point, ended the day down "just" 86.
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The S-fund, which has been hit hard lately, did hold up and close in positive territory. The Transportation index also closed positively after being pounded for a few days. The I-fund held up well and posted a decent gain as the dollar fell, and bonds were lower again.
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The SPY (S&P 500 / C-fund) fell through key support yesterday and that should keep the bears pushing, but the bulls have pounced on every two-day pullback going back to March. Red flags are flying but the bulls have thrived in these situations for some time.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Wilshire 4500 (S-fund) posted a small gain, which is a good sign, but the small caps have been quite oversold and it may not be much to go on. The fact that the longer-term support line was tested and held so far is a plus.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Transportation Index was also very oversold and managed a small gain, but what this new head and shoulders pattern will do is the question. In a bull market an H&S is usually bullish with the neckline support holding. In a bear market / downtrend, it is a very bearish formation. This is a serious crossroads for this market leader.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The EFA (EAFE index / I-fund) climbed back in the rising wedge. This is a relief, but can it hold, particularly if the dollar stops falling?
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The dollar dropped again yesterday and broke down out of a bear flag. The 20-day EMA is now below the 50-day EMA so the technical picture is getting serious, but it could be oversold in the short-term and may be due for a relief rally.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The VIX spiked above the danger zone but the rally into the close in stocks yesterday saw the VIX close back down near the border line. This is a decent sign. If it is going to move into the panic selling areas, we want it to be brief, and so far that is the case.
Chart provided courtesy of www.sentimentrader.com, analysis by TSP Talk
The AGG (bonds / F-fund) fell again. It is oversold and due for some relief but bonds are in trouble at the moment.
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
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