TSP Talk Blog

Stocks pulled back on Tuesday with the indices dropping modestly. The Dow lost just 50-points but percentage-wise, the losses in the small caps were more significant.

The theory of the decoupling of the price of oil from the stock market lost a little credibility yesterday as oil was also down close to 2%.

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A couple of important earnings reports from Intel and JP Morgan Chase after the close had the overnight futures pullback slightly.

The SPY (S&P 500 / C-fund) posted a negative outside reversal day and a little pullback from a massive rally should not be anything to be concerned about, unless that pullback started at the 200-day EMA while potentially still in a bear market. If the bull market is back, this could be nothing but a profit taking, sell the news, reaction to earnings season. But if the bear is still with us, the selling might accelerate from here.


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

The Dow Completion Index (small caps / S-Fund) didn't hit the 200-day EMA, but the 50-day EMA and the recent descending resistance line. Those open gaps we see on many charts are obvious potential targets for any pullback here.


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

The Dow Transportation index may be the biggest test for the market right now. This one has been in a bear market the longest and yesterday it fell over 2% just as the 200-day EMA and longer-term resistance line came in the picture, creating another possible lower high.


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

The EFA (EAFE Index / I-Fund) closed back below the 50-day EMA. There may be some support near 60, but that open gap may be too tempting to pass up. The recent weakness in the dollar has help lead the I-fund in October.


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

The dollar has pulled back this month, creating a large head and shoulders pattern that is testing the neckline and the 200-day EMA right now. Isn't it interesting how many different charts are testing key levels at the same time?


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

The AGG (bonds / F-fund) was flat but seem to be holding up fairly well.


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


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