TSP Talk Blog

Stocks fell sharply on Wednesday as the Dow shed 293-points and this week's "dip" has turned into another outright pullback. The S&P 500 has now gone 26 days without posting back-to-back gains, the longest streak since 1994. So, the choppiness continues.

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Semiconductors and biotechs killed the Nasdaq, which was down 2.4%.

The SPY (S&P 500 / C-fund) sold off yesterday, certainly catching me by surprise. A minor pullback from a double top is expected, but I did not anticipate talking about the 50-day EMA and rising support lines so soon. Volume picked up so the big money was getting involved. A 200 million share day today would help form a low if prior volume levels are going to be any indication. Very low volume or very high volume are telling us something and we've seen both this week. What we don't want to see is steady, 'average' volume while stocks move lower.


Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk

The Wilshire 4500 (S-fund) fell hard to to its first level of support in what looks like a possible rising wedge formation. There is still a lot of room before it tests the lower side of the large rising trading channel.


Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk

The Nasdaq took the brunt of yesterday's selling as the semiconductor and biotech sectors were pounded on. The index went from new highs to the 50-day EMA in probably record time. On the bright side, the 50-day EMA did hold up earlier this month, although there's certainly no guarantees here.


Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk

The Dow Transpiration Index had its third straight severe beating of the week yesterday and is now decisively below the 50-day EMA. The 50-EMA hasn't been much of a factor on this chart recently and now the previous lows and 200-day EMA are where we should be focused if the selling continues.


Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk

The EFA (EAFE Index / I-fund) pulled back but managed to stay within its rising trading channel, but you know that big open gap is on its mind. The 50-day EMA crossing over the 200-day EMA takes a lot a work and its not uncommon to see a fatigue pullback here, but we do not want to see that cross back below.


Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk

The selling in stocks on Wednesday was severe but I thought it was odd that gold and bonds were not rallying more with the market getting pounded. Gold was only up 0.14% and bonds...


Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk

... the AGG (Bonds / F-fund), were down so investors weren't exactly looking for the safe havens yet. Perhaps that is a good sign for stocks, or perhaps investors have become overly complacent, which wouldn't be.


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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