Rally stalls but mixed action continues
by, 11-17-2016 at 01:26 AM (1063 Views)
Stocks continue to produce mixed results as the lagging Nasdaq led the way with modest gains while the Dow, S&P 500, and Transports pulled back some. The Dow lost 55-points, but there was certainly no rush for the exits as stocks closed off the early afternoon lows.
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Small caps were basically flat while the rising dollar continues to put pressure on the international stocks of the I-fund.
As you will see below, the S&P 500 is in an interesting position as it tries to breakout of a bullish flag pattern, but the prior highs have so far held it back. This pause may be temporary but double tops are fairly consistent in producing at least minor pullbacks. The breakout in July after Brexit was not a double top, but rather a breakout above an area that was acting as resistance many times over the prior year.
Word has it that Jamie Dimon may be named as the new Treasury Secretary under President-elect Trump. It seems as if Wall Street already reacted to this rumor last Thursday but it is something that should be considered bullish for stocks.
The SPY (S&P 500 / C-Fund) remained in its flag formation for another day. The similar flag back in early July lasted 5 days before we saw a breakout to the upside, and the current flag is 6 days old. The problem this time could be the double top which often gives at least a temporary push back. As I mentioned above, it was a lot more than a double top in July.
The DWCPF (S-fund) was flat but it battled back from some modest early losses. The September high could act as support here, but we know those open gaps (1100 area) can be too strong of a lure to go unfilled.
The Dow Transportation Index pulled back quite a bit, but in comparison to recent gains it was pretty minor. There's an open gap below 8600 and then the next area of support, should the pullback continue, would be about 8350 - the old resistance line.
The EFA (I-fund) made a new multi-month low as the international stocks are not participating in the post election rally. We are seeing a good example of the power of a strong dollar on these overseas markets.
And the pressure on the I-fund may continue as the dollar (UUP) broke above a large bull flag formation. This is a weekly chart and that bull flag is over two years in the making.
The AGG (Bonds / F-fund) was up for a second day as they try to gather some strength for a relief rally. This could be a bear flag forming, but it's too early to say. I still think we could get some buying in bonds if stocks pause here. Nothing goes straight down forever.
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