TSP Talk Blog

Stocks came roaring out of the gate on Wednesday morning, posting some big early gains, but that didn't last long. About an hour into the trading day things reversed rather dramatically, falling down in sympathy with the price of oil for the next two and half hours before bottoming in the early afternoon. The Dow gave up 76-points, but once again we saw larger percentage losses in the broader indices.

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The continued decline in the price of oil is taking down the stocks in the energy sector, and whether justified or not, the rest of the market is pulling back with it. The slowdown in China is a drag on the demand for oil and its having a ripple effect around the globe.

The SPY (S&P 500 / C-Fund) ran up to the short-term descending resistance line early yesterday, and then pulled back sharply, eventually breaking below the 50-day EMA. That kind of action creates a negative reversal day, which usually rolls into the following trading day.

This is the first close below the 50-day EMA after 3 successful tests in the prior 4 trading sessions, and the first in about a month. One close below is not a confirmed breakdown, so the next few days will be telling.


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

The Dow Completion Index (small caps / S-Fund) was once again the lagging index falling another 1% on the day. It closed above the November low but being this close, it wouldn't be a surprise to see this index fill the open gap from early October, during this pullback.


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

The Dow Transportation Index had another wide ranging trading day, this time closing in the middle of the range creating a "spinning top" candlestick formation, which shows indecision from investors.


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

The price of oil closed below the August lows yesterday, which is the lowest close since 2009. There is some possible support at the bottom of the red wedge, but that support is falling. Falling wedges tend to break to the upside, but there could be more time needed in the wedge as the apex narrows.


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

The EFA (EAFE Index / I-Fund) dipped into the October open gap before closing back above it. Weakness in the dollar helped it out here a bit.


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

A couple of the I-Fund's biggest components are starting to break down from some key technical levels. The Japanese Nikkei close below the 200-day EMA yesterday...


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

And the German DAX closed below the 50-day EMA after falling below the 200-day EMA last week. It had also broken down from a rising wedge formation.


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

The AGG (Bonds / F-Fund) was flat yesterday. As I mentioned yesterday, this chart looks a little bearish, but if stocks are falling it will get some support.


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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