TSP Talk Blog

Stocks pulled back yesterday, giving back about a third of Tuesday's gains. The Dow shed 88-points while small caps outperformed the large caps, and the I-fund held up because of the dollar reversing back down. The S&P and Nasdaq futures continued lower after the close so there could be some pressure to start today's trading if nothing changes.

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The bulls put up a good fight until just before the bell when the bears put on some pressure and the indices closed near the lows of the day producing, in some cases, negative reversals on the charts.

Ironically, more stocks were up than down on the NYSE Composite, and that's not what we have been seeing lately - it's been the opposite.

As we move into the very slow end of August where volume dries up there is an interesting pattern of the seasonality chart. Overall it is a lot more bearish than a random month, but look at the back and forth in the advantage each day to end the month. Up, down, up, down...


Chart provided courtesy of www.sentimentrader.com


The Jackson Hole meeting with central bankers are sure to cause some stir over the next couple of days, and with trading volume being light this time of year, it could mean some good sized swings in stocks.


The SPY (S&P 500 / C-fund) failed at its descending resistance line and 20-day EMA yesterday, but closed above the 50-day EMA for a second day. The market didn't take off or follow-through on Tuesday's gap up open as we saw several times over the last year or two, so things do seem a little different this time. That could mean the market may want to fill that open gap before considering moving forward. We'll see.




The DWCPF (small caps / S-fund) was down slightly losing 0.11% on the day. It remains below the descending resistance line after a brief poke above it in midday trading. It's solidly below the 50-day and that's not good, but could also be due for at least some temporary relief.




The Dow Transportation Index chart is not looking too great as I see two head and shoulders patterns formed. The key is that the 200-day EMA needs to hold or we could have some downside targets near 8800. The airline stocks have been getting hit hard and that's dragging down this market leader.




The EFA (EAFE Index / I-fund) closed up slightly thanks to a decline in the dollar. It remains above the 50-day EMA but that could be a bear flag forming.




The CNN Fear & Greed Index continues to show a fairly high level of Fear out there. The market doesn't always rebound once we see Fear extremes, but many market lows are accompanied by extreme fear readings.


Fear & Greed Index - Investor Sentiment - CNNMoney


The AGG (Bonds / F-fund) rallied on the weakness in stocks and weakness in the dollar. It made a new high but the support and resistance lines are starting to converge and something is going to have to give.




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Thanks for reading. We'll see you back here tomorrow.

Tom Crowley


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