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Fed helps keep the rally going

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Stocks opened lower on Thursday but the Dow and S&P hung around the breakeven mark until the Fed Meeting Minutes were released and investors heard what they wanted to hear... I think. Well, that is the interpretation of the rally that followed. Basically it sounds like the Fed said things aren't growing enough to raise rates yet.

The Dow gained 138-points, and the Nasdaq, which was lagging and down near 1% most of the day, rallied back into the green.

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A little follow up on the Chinese Shanghai Index, which had been closed for a week - it rallied about 3% on Thursday. The Fed is watching, so we should be watching.

The SPY (S&P 500 / C-fund) broke above the 50-day EMA convincingly this week, although it has only closed above it for 2 consecutive days now - since it closed back below it on Tuesday. Yesterday's (Thursday) afternoon rally took the S&P and SPY right up to the 200-day EMA. That's supposed to be resistance in a bear market, but the stronger resistance is actually closer to 205 if it can get above the 200-day EMA. The "F" flag that we talked about yesterday, broke to the upside - mostly because of the emotional reaction to the Fed minutes.


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


There is a rare open gap on the weekly chart of the SPY and I looked back to 1990 and saw only four other gaps opened on the weekly chart and every one of them was eventually filled. Two were filled the following week. One took 6 weeks to fill, and another took 7 weeks.

One thing, some gaps showed up only on the SPY chart and not the S&P 500 Index. And in the case of the one in 2009, it was open on the Index, but not the SPY. Here's the current open gap...


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

There were actually two opened gaps in 2013. The one in July was closed 7 weeks later. The one in September closed the following week.


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


There was one in 2011 and that one took 6 weeks to get filled...


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

This one in 2009 was on the S&P 500 Index and it was filled the following week.


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


The Dow Completion Index (small caps / S-Fund) has run up to the 50-day EMA and the descending resistance line.


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


The China's Shanghai Index opened after being closed for a week and rallied 3%. Being deep in a bear market, it has stabilized and consolidated for the last several weeks, but it is up against the 20-day EMA again.


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


The AGG (bonds / F-fund) was down on the rally in stocks, but remains in the rising trading channel.


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



Thanks for reading. Have a great 3-day weekend! The markets will be open on Monday but there will be no TSP Transactions processed.

Per www.tsp.gov:
Some financial markets will be closed on Monday, October 12th in observance of the Columbus Day holiday. The Thrift Savings Plan will also be closed. Transactions that would have been processed Monday night (October 12th) will be processed Tuesday night (October 13th), at Tuesday's closing share prices.

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: www.tsptalk.com/plus.php

Tom Crowley


Posted daily at www.tsptalk.com/comments.php


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Comments

  1. law87's Avatar
    Tom, what constitute a "Major" support/resistance?

    I see that spy is hitting the July Low and September High, is that consider as Major?
  2. tsptalk's Avatar
    Probably not major in that case, but significant enough to plot.

    Major I would say is a long-term support/resistance line that has been tested more than once and held, or a convergence of support/resistance, or even a 200-day moving average.

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