TSP Talk Blog

It took about an hour, but after a sluggish start for stocks, buyers stepped in with a fury and the Dow posted its third straight triple digit move; this one +154-points. Percentage-wise it was still less than 1%, but the gains were spread through the broader indices.

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Small caps finally had a nice day, and the I-fund lagged with the dollar moving higher and U.S. stocks rallying late. Bonds were down after opening higher.

The SPY (S&P 500 / C-fund) rebounded in a key area, about where it had broke out back in July. The bull flag (blue) broke out sending the S&P to new highs, and the pullback found support on the top of the falling flag. It's possible that there is a head and shoulders pattern forming, but that isn't necessarily bearish in an uptrend during a bull market. There's a lot going on in this chart and I could have drawn several more lines of support and resistance. I believe it is telling us that it can still go either way. The PMO indicator is still falling.


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

The Dow rebounded above that key 17,150 area we talked about yesterday. This chart is in good shape now and it looks like game on for the bulls, but volatility is picking up and things can continue to be shaken up. So it's not the Dow. It's the small caps that have investors concerned.


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

The Wilshire 4500 (S-Fund) rallied back up to the old support line. Will it turn into resistance or will the 20-day / 50-day EMA crossover produce more of an oversold rally?


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

The Russell 2000 (small caps) had fallen below support on Tuesday, but it closed back above it yesterday. It is still below the 200-day EMA, but like the prior breakdowns below the 200-day EMA that we marked below, it could be stabilizing and trying to form a bottom. It is in a downtrend now so I am still concerned that we could see a lower low (below the early August low) before this is over.


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

The EFA (EAFE / I-fund) posted another outside reversal day. That's 3 in the last 7 trading days, which is very unusual. The 200-day EMA was broken on Tuesday and yesterday's rally took it right back up to it. Interesting situation. We'll either be seeing a double bottom here, or a resumption of the downtrend.


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

The AGG (Bonds / F-fund) rebounded early, but reversed down as stock rebounded. It had been due for a rebound and it was in the middle of a 4-day rally, but in the end yesterday, it could not close above the 20 and 50-day EMAs.


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


Posted daily at TSP Talk Market Commentary

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