A second day of selling
by
, 07-08-2014 at 08:09 PM (1839 Views)
Stocks posted a second straight negative day with the small caps lagging again. The Dow lost 118-points, or about -0.7%, but we did see some positive reversals on a couple of charts.
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The dollar was about flat and the I-fund fell 0.85%, but we saw France's CAC Index breakdown further and is now at a make or break area that could impact more of the markets within the I-fund. Bonds were up.
The SPY (S&P 500 / C-fund) fell sharply in early trading yesterday and battled back some closing off the lows after testing the bottom of a short-term rising trading channel and the 20-day EMA. The market has been flakey but this chart has not really shown any technical damage at all yet.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Russell 2000 is another story as the two-day loss has been much more severe on the small caps and clearly the double top turned out to be strong resistance. We've seen both the 20-day EMA and the rising support line break this week. There are no open gaps to fill on the downside so the next test, should this index continue to slide, is the 50-day EMA. That little positive kangaroo tail could mean some upside follow-through in early trading today, but it will be the close that matters.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Nasdaq also had a bad day closing down 60-points. It did bounce off the 20-day EMA, but that's about the only positive to note. There's not a heck of a lot of support below if this index falls below the 20-day EMA. That's the bad thing about rallies that go virtually straight up. The don't leave behind much support.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Transportation Index was the bright spot yesterday. It did close in negative territory, but just barely as it nearly regained all of a large early loss. The kangaroo tail reached well below the 20-day EMA and the short-term rising support line, but it closed back above them.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
France's CAC Index fell another 1.44% yesterday and is breaking down sharply. There's not a lot of room for error here as it tests the 200-day moving average and the bottom of a large parallel trading channel (orange.) This is a bull market tester. This index makes up about 10% of our I-fund's value, but it could impact some of the other larger markets in Europe if it breaks down further. By comparison, the U.K. is about 22% of the I-fund, Germany 9.5%, Switzerland about 9%, and Japan 21%.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
Bonds rallied yesterday as investors moved money from stocks into bonds. The IEF chart has now filled all of the downside open gaps (blue) but created 2 new small open gaps (red.) It also made its way back above the 20 and 50-day EMA's. There's some possible resistance overhead but that dash line isn't official yet - not until we see a lower low.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
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Thanks for reading! We'll see you back here tomorrow.
Tom Crowley
Posted daily at TSP Talk Market Commentary
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