Stocks chopped around quite a bit on Wednesday, coming off the best levels by the close, but the results were mixed in the various indices. The Dow lost 39-points and Big Blue (IBM) shaved 60 points off the Dow as it was down 7.5% yesterday. The S&P 500, Nasdaq, the I-fund and small caps posted small to moderate gains, while the Transports had a big earnings driven rally.
Daily TSP Funds Return
Oil made a 3.5 year high yesterday as it broke out of it cup and handle formation with some authority. This has helped the energy sector breakout of a long base recently, and this may be why stocks have come to life again.
A longer-term view of the oil chart shows that there is a large open gap near $74 from back in late 2014 that may be the target for this rally.
Whether it's higher demand, which is a sign of economic strength, or issues in the Middle East, or even lower supplies, rising oil means rising gasoline prices and when they start to get too high it's like an added tax on consumers so let' hope it is closer to a top than the start of run to new all-time highs.
The S&P 500 / C-fund held onto slight gains in yesterday's choppy action and so far that open gap (blue) from March is holding the index hostage - well for two days, anyway. It's still in a short-term rising channel and above the 50-day EMA so it's tough to get bearish, but watch resistance and support lines for clues of any fatigue after the 3-week rally off the recent lows. There is a small open gap (red) down near 2686.
The small caps / S-fund had a solid day yesterday with a 0.3% gain but it is up again some resistance. The blue dashed line is a parallel line with the bottom of a possible head and shoulders pattern. It's not set in stone since H&S patterns are not always rigid, but it was interesting that the index hit that line yesterday and pulled back.
The Dow Transportation Index had a big day following the CSX earnings report. It hit the March highs and dipped back a bit, possible hitting the top of a trading range between about 10,100 and 10,850.
The EAFE Index / I-fund gapped up and is now flirting with the top of its recent trading range.
The Volatility Index did find support at the 200-day EMA so that's why I suspect this would be a good time for stocks to take a rest. They don't have to go down sharply, but some churning and burning might do the indices some good before trying to move to another leg higher, and some pop in the VIX here would seem reasonable.
The AGG (Bonds / F-fund) fell sharply as yields rose after some hawkish comments from the Fed. It is now testing some key rising support.
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