The day started out with some concerns of whether the White House top economic advisor Gary Cohn was going to resign, and ended with more selling after a terror attack in Barcelona hit the wires.
We had mentioned yesterday that the bond market seemed to be setting up for some kind of of trouble, and I would categorize yesterday's action as troubling, and bonds did respond with a rally.
T'is the season. August is starting to act like August. The headlines are scaring investors, and for the last several months this kind of thing was shrugged off, so perhaps it is finally time for a correction - or will the dip buyers come to the rescue again? It's been a long time since we've had a proper correction, so is it time? The market has been very resilient this year. Here's another test.
The SPY (S&P 500 / C-fund) posted a high volume down day on Thursday, and it could have been more encouraging if the high volume was associated with a positive reversal, but instead the indices closed at the lows. It's hard to compare recent months to Thursday's action because we have had little panic over the last 6 - 9 months, but still, prior spikes this high did precede some rallies. If this is the end of the bull market, this may be a moot point, but so far the ascending trend is intact. Watch that 242 level. That could be the tell.
The DWCPF (small caps / S-fund) was hit hard giving up this week's gains and testing some long-term support. The 200-day EMA is a possible target if the support near 1200 fails.
The Dow Transportation Index went from a breakout above the bear flag early on Wednesday, to breakdown on Thursday. Here it is back again testing the double bottom (now a triple) near 9100 with the 200-day EMA just underneath 9100. It's not shown but it closed just below the 200-day SMA (simple average) for a second time in a week.
The EFA (EAFE Index / I-fund) was down and is once again testing its sturdy 50-day EMA, but we keep seeing these lower lows on many of the charts.
The Energy Sector has been falling just about every day this month. After failing to hold an upside breakout above the large descending trading channel earlier in the month, it is now flirting with the downside support of that channel. Can it hold?
The AGG (Bonds / F-fund) made a new high after consolidating and creating that bull flag for the last few weeks. As I mentioned on Thursday, it looked like bond traders were looking for something to happen, and perhaps the action on Thursday was it. If that's the case it could pullback from here, otherwise, what else is coming?
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