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| Today's Commentary (Short Term Outlook) |
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Is the rebound over? After Monday's terrible midday reversal / outside day, Tuesday's action wasn't any better. After some early morning strength, the Dow closed the day down 149-points, and the technical damage is bad. For the TSP, the C-fund fell 1.59%, the S-fund dropped 2.15%, and the I fund lost 1.09%, while the F-fund was up 0.27%. We started getting a little nervous when the S&P 500 was struggling to push above the 50-day EMA last week, but the market opened up very strongly on Monday morning, easily breaking above the 50-day EMA. That excitement was short-lived as stocks headed lower into Monday's close, and made a very bearish reversal outside day close below the 50-day EMA. On Tuesday the S&P rallied back up to the 50-day EMA, but that was all she wrote, as the indices headed south in a hurry after that, closing below the 200-day EMA once again.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk It is too early to say, but the Head and Shoulders pattern (H&S) is starting to take shape, and short of this being a fake out that heads straight back up again, it looks like the S&P 500 may want to make another test of the support line (neckline of H&S) near 1040. And H&S triple (or quadruple) bottoms don't generally end well. If there is a thread of optimism to be found, we can take another look at the 2007 market top where the push to new highs was very volatile (see circled area) so it may be too early to completely give up, but any time you trade below the 200-day EMA, you have to be thinking defense.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk The Dow Transportation Index, one of the market leaders, was down nearly 4% yesterday. It too is creating a H&S pattern, although it is sloping higher. Still, an H&S pattern is generally a bearish pattern no matter which way it is tilted. The Transports are still trading above their 200-day EMA, but yesterday's losses gave up the 20 and 50-day EMA's.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk We had talked about the dollar needing a pullback as it hit some longer-term resistance earlier this month, and we thought weakness in the dollar could give the stock market some needed relief. Well, that played out nicely but now the dollar seems to have found some support at the 50-day EMA and perhaps that help from the dollar has finished playing out?  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Today the Fed wraps up their FOMC meeting and at 2:15 PM ET
they will announce any policy changes. It may be a market mover if
there are any surprises. |