TSP Talk Blog

Stocks opened lower on Tuesday, but the buyers stepped up and most indices closed in positive territory while bonds declined. The Dow gained 27-points and stocks have been up for three straight days, making it appear that buying the recent dip was the way to go.

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The I-fund was down again as once again the strength in the U.S. market came mostly after the overseas markets were closed, but also because the dollar was up despite some inflationary economic data.

I am not an economist and I do almost all of my analysis based on technical data rather than fundamentals, so why the dollar was up and gold was down after the higher than expected inflationary CPI numbers, I don't know. But I don't really need to know. I just need to know how investors are reacting and that story is told in the charts.

The two-day FOMC meeting concludes today so look for some possible volatility this afternoon.

The SPY (S&P 500 / C-fund) rallied modestly and continues to bounce off of support from the old resistance lines, but there is a possible bear flag forming. The good news is, similar bear flags on the Nasdaq and Russell 2000 broke to the upside so this may turn out good for the S&P.


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

The Nasdaq looks to be ready to break out from its small consolidation, which looked more like a bear flag on Monday.


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

The small caps also broke out to the upside from a small bear flag. Support from the bottom of the filled gap and the old rising wedge resistance line (red) has held so far and we may see another attempt to reach toward the March highs.


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

The Transportation Index needs a little help because it has a classic bear flag formed (red). The old resistance line and the rising support line are being successfully tested and the index needs a move above 8100 or 8150 to break the flag. There was a similar bear flag in April that did break to the upside.


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

Bonds fell yesterday and the IEF did close below the 50-day EMA. The rising support lines have already broken so if the 50-day EMA's start to break, we could be seeing the start of a downtrend in bonds.


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


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

Tom Crowley


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