TSP Talk Blog

Stocks opened lower on Wednesday and continued to drift downward throughout the day leaving the indices with some moderate losses, some worse than others and the Dow lost 178-points. Investors had been led to believe that the situation with Greece was a done deal, but it turns out they are still negotiating and are stuck on a few issues.

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The I-fund led the stock funds because of some payback from Tuesday, but also because the U.S. indices weren't as negative on Wednesday morning when the European and Asian markets closed. Bonds were the beneficiary of weakness in stocks.

The SPY (S&P500 / C-fund) pulled back from the recent test of the highs. So far it is just noise and there is decent support underneath the SPY near 209.50, but the fact that it didn't make a new high before pulling back is one of the concerns.


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

The Dow Completion Index (S-fund) dropped 1% on Wednesday filling the small gap it left open on Monday morning. 1127 and 1118 are the next best bets for support today should the pullback continue. It's tough to be bearish when you look at this chart as a whole, but often the attitude is, what have you done for me lately, and so we'll see if the dip buyers are willing to buy a strong chart after one bad day.


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

The Russell 2000 small cap index shows the open gap a lot better than the Dow Completion Index above. Support should be quite stiff in that red circle. If not, there's a lot further to fall.


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

The Dow Transportation Index dropped sharply from some fairly strong resistance levels. There was a confluence of trendlines and moving averages in the 8525-8550 area, and while in a bear market (which the trannies are in) we should expect bearish results.


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

The EFA (EAFE index / I-fund) ended the day down nearly 1% and now both of the large gaps above and below the index are partially filled. I didn't mark it on the chart, but a new small gap was opened near 67.40. The gap down to 66.30 seems to be the most compelling in the short-term since the EFA is heading in that direction.


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

A little follow-up on the Chinese Shanghai Composite shows another big gain off the Tuesday lows. That's a 2.5% gain yesterday. It's still in a short-term downtrend so I suspect we haven't seen the end of the volatility there, but if the upside continues, we can check this concern off our list. Getting back above 4800 would be a good sign.


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

The AGG (bonds / F-fund) was up since investors needed to throw money somewhere. But that's still a bear flag in a downtrend so the rally was nothing to get too excited about yet.


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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