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| Today's Commentary (Short Term Outlook) |
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Dollar Dings Dow Stocks were up big Monday morning but an early 100-point gain in the Dow quickly turned into a 100-point loss by lunch-time, and it closed down 104. The TSP stock funds lost between 1.2% and 2%. The bond fund also lost 0.2%.  What was the catalyst? Take a look at an intraday chart of the U.S. dollar below. As it rallied after 11:00 AM, stocks started their nosedive.  Although earnings have come in OK this earnings season, the market seems to be hanging onto the coattails of the continued weakness in the dollar. Now we get a big rally in the dollar, and stocks can't hold on. It is tough to want the dollar to go down, but if you have money in the stock market, a rebounding dollar may not be your friend - in the short-term, anyway. The S&P 500 has now broken below the 20-day EMA, and as we talked about yesterday, is following the Dow Transports, which broke through last week.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk Yesterday the market leader, Dow Transports, broke below the 50-day EMA and is now hanging on to the longer-term support line. Is the S&P next? The PMO is in sell signal territory, but having the 200-day EMA below should be a nice cushion. I don't want to get ahead of myself, but that 200-day EMA better hold if tested.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk The other market leader, the Nasdaq, closed just above its 20-day EMA and is also hanging onto the rising support line.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk The angle of this rally for all of the above indices is not really sustainable so a little correction here is probably a healthy development. The NYSE overbought/oversold indicator (OB/OS) is back near the -500 area; the area that has been a green light for the bulls since this rally began back in March.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk The fact that the last peak was not able to push the OB/OS up near +1000 was our indication that this pullback may be a little more severe, but as of now, -500 is holding. I'm not sure how long that can last. Hopefully anyone with a little (or a lot) of cash on hand will get a better buying opportunity in the weeks ahead. Short-term market timers may be buying already since many of the support areas and indicators (OB/OS) are saying it's time again, but if the support starts to give way, that's your queue to go back on defense. Intermediate-term timers may be thinking the same thing. The market must rebound very soon, or expect a few more weeks of correction. Buy and holders? Well, we know what you are going to do, and I hope you don't get hurt if things get nasty. Not that I expect too much downside - at least not while all the moving averages are still behaving. But if that changes... The Dow has now moved 90 or more points, up or down, 6 of the last 9 trading days. Volatility is back. Keep an eye on the U.S. dollar. That's all for today. Thanks for reading. We'll see you back here tomorrow! |