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Indices diverging wildly

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Stocks were mixed again on Tuesday with the Dow shedding 32-points, the S&P 500 was flat, and the the Nasdaq was up solidly. Small caps and the Transportation Index had big days. Biotech stocks have been doing well helping the Nasdaq while recent weakness in the price of oil has held back the Dow and S&P.

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Oil has been a drag on the larger indices since peaking on January 2, and it broke down from its rising support line and a rising wedge pattern yesterday. The 50-day EMA is being tested now so we may see a battle between EMA support buyers and support line breakdown sellers.

The SPY (S&P 500 / C-fund) posted a negative outside reversal day after pulling back from the morning highs and closing near Monday's low. The bull flag pattern is still holding on as far as it closing above that old resistance line after the breakout last week, but the negative outside reversal does tend to be followed up with more action in the direction of the outside reversal's close, which in this case is down. We'll see if the flag's support can keep that from happening.

The DWCPF (S-fund) had a big day gaining almost 0.7% while it holds above its flag formation for another day, and above the 20-day EMA.

The Dow Transportation Index had a nice day as well and it did try to poke its head above the 20-day EMA and the descending channel, but it couldn't quite close there so this still looks a little suspect.

The Nasdaq, and particularly the Nasdaq 100 large cap tech index, have been outperforming and making repeated new highs lately. It is testing the top of its large rising channel and remains in another very tight rising channel within the large one. It looks a little vulnerable up here but there's no denying that it has been the upside leader this year.

The EFA (I-fund) was flat yesterday with a possible bull flag forming as it digests the recent gains. There is still a good sized gap open near 58.25.

The AGG (bonds / F-fund) have resiliently remained in its recent rising channel and above the 50-day EMA despite how weak bonds were just a few weeks ago. I still say 2017 will not be a good year for bonds but being above the 50-day EMA keeps the possibility of a move up to test the 200-day EMA alive.

Read more in today's TSP Talk Plus Report. We post more charts, indicators and analysis, plus discuss the allocations of the TSP and ETF Systems. For more information on how to gain access and a list of the benefits of being a subscriber, please go to:

Thanks for reading. We'll see you back here tomorrow.

Tom Crowley

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S&P 500 (C Fund)
DWCPF (S Fund)
Dow Jones U.S. Completion Total Stock Market Index (^DWCPF)
EFA (I Fund)
iShares MSCI EAFE Index (EFA)
AGG (F Fund)
iShares Lehman Aggregate Bond (AGG)