At the risk of harping on seasonality, the September chart is telling us that we are in the thick of a weak 5-day stretch where stocks tend to be down more often than up, and that's going back 30 years which makes it the most negative time of the year. That doesn't mean it is always down, but if this market is ever going to take a breather from the recent highs, this would be a good time. But we're in a bull market so use caution if betting against stocks.
Chart provided courtesy of www.sentimentrader.com
The action has not been bad at all so this is not a call for a market top. But we're overdue for one of those elusive 5% pullbacks, not to mention that we haven't had a 10% correction in a long time - something we used to see nearly every year. But interest rates near 1% can do that.
The SPY (S&P 500 / C-fund) fell back into the small "F" flag that we've been tracking and it testing the short-term rising support line. I still see that open gap as a potential target for a pullback but I'm surprised, looking at some indicators, how nervous investors got with one down day, which is usually a contrarian indicator, so that makes me think any pullback might be shallow, despite that we are probably due for more of a shake up. We'll see.
The DWCPF (small caps / S-fund) was down slightly and it continues to hold up well, but you can see in this chart how far it's come without too much of a wiggle. I would think it needs to digest the gains a little more before breaking out, but I have underestimated this market often this year.
The Dow Transportation Index bucked the negative trend on Thursday and was up on the day, but as we saw on the S&P and small caps the other day, we have one of those indecisive spinning top candlestick formations that can be a sign of an impending reversal.
The Transports are generally considered a barometer for the economy so its recent action has been a good sign, but copper is also a stealth economic indicator and it has been struggling of late. It broke below another small bear flag on Thursday and is being held up by the 50-day EMA, which would be a good place for support, but if that breaks we have a tough call on the economic picture.
The EAFE Index (I-fund) got a little break from a weak dollar yesterday but the I-fund had a little fair value to pay back, which is why it wasn't up as much as the EAFE index.
The AGG (Bonds / F-fund) was down slightly and it continues to hold above some very important support.
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