TSP Talk Blog

Stocks gapped up sharply higher at the open on Tuesday and but it didn't take too long for the bears to make their move and push the indices lower, and by mid-afternoon we were seeing red. A 184-point gain turned into a nearly 90-point decline. A late rally helped push the Dow and S&P 500 back into positive territory for the close, but the Nasdaq, the Transports, and the small caps all ended the day with losses.

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The I-fund had a big day but most of those gains came prior to the U.S. indices moving sharply lower.

The action is not that great but we are seeing some signs that the bears may be running out of steam... for now. They have done enough work and probably deserve some time off, but how much time will they give the bulls if the indices start to rebound?

The price of oil continues to dictate the action as we saw new lows on the price of a barrel of crude yesterday.

The S&P 500 Index (C-Fund) closed just barely in positive territory after retesting the August lows and holding. Although the market is by no means out of the woods, holding the lows was a good sign. The spinning top formation that I've illustrated below, is a formation that means indecision by investors and can often be a sign that the trend is about to change. That's hopeful thinking on my part but I can see why investors would be indecisive here. They wonder if they should buying the bargains, selling what they have, or just waiting on the sidelines to see which way it is going to go.


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

The Dow Completion Index (small caps / S-Fund) looks like it is ready to make a move. It is trying to hold above the longer-term support line while it remains below the quickly descending resistance line. Something is going to have to give.


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

The price of oil rallied early, which helped stocks open higher, but collapsed and closed at the lows. If you watch the price of oil during the day, with a intraday chart of the S&P 500 next to it, you will see that they are moving in the same direction almost tick for tick.


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

The Shanghai Index in China has become a main focus and after testing the August lows on Monday, it held again and rallied up on Tuesday. This would be a good place for it to rebound, but there are a lot of issues in China and we probably can't count on anything "typical" to come out of their market right now.


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

The Japanese Nikkei also tested the prior lows yesterday and the question is, can it find support here before breaking down, which would keep the sharply descending trend alive?


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

The AGG (Bonds / F-Fund) was relatively flat, like the S&P 500, as the bulls and bears continue to decide just how defensive they should be getting.


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


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Tom Crowley


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