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Oil up, China down, U.S. stocks rally back

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Keeping investors on their toes, the stock market reversed Monday's losses with some big gains on Tuesday. The Dow gained 282-points and we saw returns of 1.4% to over 2% across the board, including oil. To make matters more confusing...

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... the futures dropped sharply after hours on a disappointing earnings report from Apple, so it appears the choppy action heading into - Correction - today's FOMC meeting and rate decision, is going to continue.

China's Shanghai Index dropped more than 6% on Tuesday so apparently the price of oil is more important as it gained 2.4%, but it did close the day $1 off its highs so the wild swings continue.

The S&P 500 Index (C-Fund) stayed above some key levels, at least for the fact that we can say the "V" bottom is still intact. Holding above last summer's lows is also a good thing showing us that there were willing buyers below that support line. The S&P 500 really only closed once below the low close in August, and that was on last Wednesday's reversal day.



The bigger question we have now is whether this low is going to ignite a rally like we saw in October 2014, which was a "V" bottom, or if it will be more like last summer where the retest created a "W" double bottom.



The
Dow Completion Index (small caps / S-Fund) gained over 2% yesterday and is also holding above some key levels. Not surprisingly the swings both up and down have been more volatile in the S-fund, so you can possibly make more money playing the S-fund if stocks rebound, but still being officially in a bear market, that brings with it more risk.



The price of oil gained 2.4% on Tuesday but you can see that for a third straight day it flirted with the 20-day EMA but could not climb above it. And for a second day, it closed well off the intraday high.



The EFA (EAFE Index / I-fund) has rebounded off the lows but will start to hit the first level of overhead resistance near 55. Two gaps have been filled (blue) but there is still a gap open down near 53.25 (lower red gap.)



The Chinese Shanghai Index broke below the August lows on Tuesday and lost 6.4%. If this is going to be an ongoing concern, and the Fed may address it this week, then we may not be out of the woods yet in our market. We'll see if it can rebound on Wednesday in sympathy with our market rally on Tuesday.



The AGG (Bonds / F-fund) continues to zig when you would think it should be zagging. A big rally in stocks would normally see money coming out of bonds but lately we have seen the opposite as stocks and bonds have moved in similar directions of late. The Fed's decision on interest rates Thursday may give us more clues as to whether this wants to breakout, or go back down to test the previous lows.




Read more in today's TSP Talk Plus Report. We post more charts, indicators and analysis, plus discuss the allocations of the TSP and ETF Systems. For more information on how to gain access and a list of the benefits of being a subscriber, please go to: www.tsptalk.com/plus.php


Thanks for reading. We'll see you back here tomorrow.

Tom Crowley


Posted daily at www.tsptalk.com/comments.php

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