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The Fed helps stocks erase losses, but resistance holds

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Stocks were up early on Wednesday but drifted lower as we approached the FOMC policy statement. After the statement the market had its usual violent ups and downs but settled with modest gains. The Dow ended the day up 31-points.

Daily TSP Funds Return

The S-fund fund lagged but were positive, and bonds were up.

The good news for the market was that the Fed said the economy is showing signs of strength. The bad news is, they said it is strong enough to withstand interest rate increases, but they are monitoring the data and are they are still concerned with the labor market.


The SPY (S&P500 / C-fund) rallied while Janet Yellen was speaking yesterday but hit the descending resistance line and backed off, so that "weak" resistance, as I had been calling it, held again on its second test. It closed above the 50-day EMA for a second straight day.


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


The Dow Completion Index - which is what the TSP has been using for the S-fund these days (it used to be the Wilshire 4500, but they are basically the same thing) is still testing the upper range near 1127 and the rising support currently near 1110. The good news is, it looks like it wants to break out. The bad news is, the path of least resistance is down toward the bottom of the range, or at least the 50-day EMA.


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


The Dow Transportation Index was not up with the other indices yesterday and it continues to be a thorn in the overall bullish picture and it's not something we should ignore, and as you can tell I haven't since that head and shoulders pattern appeared.



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


The
EFA (EAFE index / I-fund) posted a nice positive reversal day triggered by the Fed press conference, but it is still below descending resistance while trying to hold above the 200-day EMA.


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


The dollar did breakdown from the bear flag and resistance line we talked about yesterday. It looks like a test of the May lows are coming next.


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


The German DAX, the major economy in Europe, has been in a downtrend since peaking in early April. The last 3-days' action does look like it is trying to form a low, but there is still a lot of overhead resistance and a "V" bottom may be tough to pull off. Greece's debt is taking its toll again on the European markets and the DAX may be the pulse of the situation over there.


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

Today is trading day #14 in June and it starts a bit of a rough 6-day period historically in June, with one big exception, tomorrow (Friday, day #15.)



The AGG (bonds / F-fund) was down sharply before the Fed policy statement yesterday, but rallied back after giving the chart a strong positive reversal day. At first it looked like we were getting the breakdown from the bear flag that we've been watching, but the reversal put it right back into the flag so I guess the "V" bottom is still a possibility.


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 www.tsptalk.com/comments.php

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EFA (I Fund) (delayed)

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