TSP Talk Blog

08/21/13

Buyers stepped in after after the 4-day pullback and most of the major indices saw modest to strong gains, but the weak close actually took the Dow into negative territory for the day, losing 8-points.

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The S&P 500 (SPY) gained a half of a percent but the overhead 50-day EMA has held for a 3rd straight days. Except for the weak close in the Dow, yesterday's action would make you think that market overall looks like it wants to do its typical 2013 V-shape bottom thing, but the light volume during yesterday's rally may mean investors are holding back and waiting for someone else to go first.


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

Or, they are waiting on the Fed Meeting minutes, which will be released today. Half the economists in a Reuters poll expect the Fed tobegin tapering its bond buying program in September. This could make or break the market.

The leaders had a splendid day. The Transports rallied 1%, but the IYT ETF did stall at the top of the new descending trading channel and the 50-day EMA.


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

The Nasdaq 100...

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... was up big in the morning, but it gave back much of those gains during the last half hour of trading. The 20-day EMA has been holding as resistance. I'm not sure if we're seeing a bear flag forming here, or another consolidation like we saw in July that led to another leg higher.


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

The small caps of the Russell 2000 bounced right back up over the 50-day EMA with authority yesterday. We started counting the days below the EMA and the small caps wanted no part of it. There is a new downtrend but also some room above with a large open gap that will want to be filled.


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

The short-term indicators (not shown) are curling up and may mean more short-term gains, but the longer-term indicators still show that we could have more downside to go.


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

10-year treasury yields finally took a break from their 5-day sharp move higher. This pullback in yields gave the F-fund a needed boost as it gained 0.3% on the day. (bond prices move opposite of bond yields.)


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

The longer-term bonds are just not looking very good technically, as we've seen breakdown after breakdown since the May high.


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

Yesterday's drop in bond yields is what helped the stock market so that may have to continue if we are going to get any kind of a bounce back rally. The threat of rising rates is what scared the stock market recently, and that is the new theme that investors are watching.

That's the opposite of what we had been used to over the last few years where bond yields and stock prices moved in the same direction. Now, rising rates may be what holds stocks back.

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

Tom Crowley


Posted daily at TSP Talk Market Commentary

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