TSP Talk Blog

A positive open was sold off immediately on Wednesday, but the bulls bounced right back and took the indices into positive territory and by the close we saw decent gains across the board. The Dow gained 89-points with the other indices gaining a respectable 0.2% to 0.5%. Despite being near all time highs, the market continues to climb the wall of worry.

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The large caps led, the I-fund always seems to be a day behind, and bonds took a hit.

The S&P 500 (C-fund) closed near the highs of the day after making a lower low in early trading. It did not make a higher high so it wasn't an outside reversal day (as the Nasdaq did) but it is still bullish action. This formation resembles a "cup and handle" formation and they do tend to break to the upside. Is today the day? There have been 4 attempts to break above the overhead resistance line this month. Will #5 be the charm or will the bears be able to hold it back again?


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

These reversal days have done well to predict the very short-term action, but not so much the day's close. The negative reversal day on Tuesday led to early weakness on Wednesday morning but by the close, the Wilshire 4500 (S-fund) produced a new positive reversal day. The bulls have the momentum now, at least heading into the first hour of trading today.


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

The Nasdaq filled an open gap during Wednesday morning's weakness but bounced back and closed above Tuesday's high creating a positive out side day. This is a little more bullish than just a positive reversal day since the bears had their shot when making a lower low, but they gave up and the bulls took control. I would not be surprised if the Nasdaq broke out with a big day today.


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

The EFA (EAFE Index / I-fund) is in a pesky rising wedge pattern, which tend to be bearish and break to the downside, so we'd really need to see this break above resistance or there could be trouble. The dollar may have a say in this one...

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

And the dollar is getting a little vulnerable now. If the 50-day EMA wasn't holding I'd say this is a slam dunk of a bearish formation for the dollar (which would help the I-fund) but until the 50-day EMA breaks down we should assume it is going to be support for the dollar. I'd look for another test of the 50-day EMA very soon and we should have our answer.


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

After cracking below support on Tuesday, the AGG (Bonds / F-fund) broke down on Wednesday. The larger trend is still up, but the short-term just turned bearish, although we could see a dead-cat bounce rally in the very short-term (intraday to a day or two).


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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