TSP Talk Blog

06/12/13

It was another triple digit move for the Dow yesterday; this one a loss as turmoil over the Bank of Japan's decision to hold their monetary policy steady saw stocks around the world decline. The Japanese Nikkei Index had tumbled over 3000 points in the last couple of weeks so many expected some kind of change in their policy.

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The Dow opened sharply lower to the tune of about 140-points, but bottomed quickly and it looked like we were going to see a positive reversal day after the indices moved into positive territory before noon. Sellers put the pressure on again in the afternoon trading, and while we never did see the lows hit again, the Dow did put in another triple digit loss.

The S&P 500 pulled back and may have produced a lower high, although technically it is too early to say. It does look like a potential failed breakout and the chart I was bragging about yesterday, may be making a turn for the worse.


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

The leading Transports are testing the top of their new short-term descending resistance line.


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

The Nasdaq did produce a failed breakout and closed back below the 20-day EMA, so the leaders are showing signs of trouble as well.


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

On the other hand bonds, which have been getting beaten up over the last several weeks, put in a positive outside reversal day (on the 7-10 year treasury ETF) and that kind of action can produce trend reversals. The ETF also found support and rebounded from the low made on June 3.


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

Inversely, the yield on the 10-Year Treasury rose to make a new 1-year high near 2.25%, but closed back down below 2.2%. This chart looks like a top in yields may be in for at least the short-term. A possible bullish setup for the F-fund.


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

Although the stock charts and indicators were giving us reason to believe the rally was going to continue easily, the 5th Hindenburg Omen signal that we talked about yesterday, gave us reason to be concerned. Now we are seeing a small crack in the charts that may be concerning. Why the sentiment indicators across the board are looking so bullish for stocks, I don't know. Sentiment is usually one of the most reliable indicators so I don't know exactly what to expect. As I mentioned the other day, your tolerance for risk may make your decision different than mine here.

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

Tom Crowley


Posted daily at TSP Talk Market Commentary

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