TSP Talk Blog

Stocks opened relatively flat on Monday but sellers took control early and pushed the Dow down over 200-points a couple of times before we saw some buying kick in later in the day. By the close the Dow was down 117-points, a nice improvement, but once again we saw more weakness from the small caps and Transports.

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The interest rate hike from the Fed is almost a foregone conclusion and attention is now on the price of oil which dropped sharply yesterday and hit the August lows.

The SPY (S&P 500 / C-fund) rebounded off of the morning lows to close down about 0.6%. The bulls would have preferred to see some upside follow-through to the big jobs report rally on Friday, but as we noted in Monday's Commentary, big gains after the jobs report can be fleeting. Volume was down during the selling Monday, which could mean that not everyone buying on Friday was selling on Monday. It remains below the rising support line, but above the major moving averages


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

The Dow Completion Index (small caps / S-fund) flirted with a breakdown on Monday, closing just below the rising support line. It fell back below the 50-day EMA so there's a little battle going on here to hold on but right now the bears have the edge.


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

The Dow Transportation Index, like the Dow Completion Index above, has continually failed at the 200-day EMA and is now fighting for its life to recapture the rising trading channel, after closing below it for a 3rd straight day. Failure to recapture the old support line puts the Transports, normally the market leader, in a lot of trouble.


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

You would think that lower energy costs would benefit the Transportation Index, but it is declining despite the falling oil prices. Oil fell over 6% yesterday, testing the lows made in August.


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

A case can be made that the S&P 500 lags oil's weakness, but later catches up as we saw in August, and to some extent in October. Can the S&P 500 avoid the same fate, or at least avoid a decline from the near new highs while oil is hitting the August lows?


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

The EFA (EAFE Index / F-Fund) was down and is back below the 50-day EMA and closed for a 3rd day below that short-term support line.


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

The AGG (Bonds / F-Fund) rallied up to the old support line and nearly filled the open gap near 108.60 before pulling back again. It closed with a modest gain.


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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