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Early rally fades

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Stocks were very strong early on Thursday and the Dow had a gain of about 275-points by noon ET, but the bears were not deterred and they put the pressure on yet again. The bulls made a half-hearted attempt during the final hours and were able to close the indices up modestly, and the Dow closed with a 116-point gain. Of the major indices, small caps lagged while the Transports and I-fund led.

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Oil rebounded strongly helping stocks come off the recent lows but the rally in stocks wasn't overly impressive. The oversold conditions would lead us to belief that more relief is due, but if stocks don't make a move and only drift sideways, the less oversold they become, and they could miss their chance.


The S&P 500 Index (C-Fund) didn't exactly fly off the lows, but the action wasn't bad yesterday. The spinning top candlestick formation shows that the bulls and bears are still battling fairly hard. Something has to give. We could very well see a test of the Wednesday's lows, as we saw back in August / September, but normally we'd get some kind of relief in between.


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


The weekly chart gives us some perspective on why we may have gotten a bounce where we did on Wednesday. It was the October 2014 low and it hit the 200-week moving average.


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


The Dow Completion Index (small caps / S-Fund) had a big reversal day on Wednesday but couldn't follow up with a gain on Thursday. That's not great, but it held up above Tuesday's low so nothing is broken about the reversal yet.


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

The Dow Transportation Index followed through impressively on Thursday with a 1% gain. It is hitting some old and current support that may try to hold it back. If it can make a move up to 6800 should open it up for a further move to 7000.


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

The EFA (EAFE Index / I-fund) had a nice day trying to fill the first open gap. It was a decent follow-through after the reversal but the downtrend is still very much intact.


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

The High Yield Bond Fund also reversed and remains in the larger trading channel / possible falling wedge formation.


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


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
Thanks for reading. Have great weekend!

Tom Crowley


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

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Comments

  1. valleymd's Avatar
    Looking back to October 2014 commentaries, and I noticed there looks to be an open gap that never got filled, until the downturn this January. That gap took a long time to close. Now hopefully we're off to the races with a filled gap, and oil stabilizing.

    http://www.tsptalk.com/mb/blogs/tspt...-can-last.html
  2. tsptalk's Avatar
    Nice catch on the old gap!

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