TSP Talk Blog

Stocks opened modestly lower on Monday but the dip buyers didn't take long to jump in. There was a late afternoon push lower to move the Dow into negative territory, but the dip buyers were not far off again, and the Dow closed up 67-points. There were mixed results in the broader market as the S&P was slightly better than flat, small caps had a strong day, and the Nasdaq was down on the day.

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We're seeing a change in character in the market, not only from the standpoint of a strong rally off the recent lows, but the major stocks that were leading the way higher in 2015, are now the ones lagging this year. Remember "FANG"? Facebook, Amazon, Netflix, and Google (now called Alphabet) were all down sharply yesterday pulling the Nasdaq and the Nasdaq 100 down.

Oil jumped again, but it didn't seem like stocks were tagging along as closely yesterday. There is now actually some talk about whether rising oil prices will start to be a negative for stocks, now that it has rallied 46% off its February lows.

The S&P 500 (C-Fund) ticked above the 200-day EMA again yesterday and remains in a rising wedge and a very narrow "F" flag formation. These flags can continue higher for some time, but they tend to eventually break with a thud. We'll see. That open gap near 2050 may be the draw that is keeping this index from pulling back from the 200-day EMA.




The DWCPF (Dow Completion Index / S-fund) is also in a narrow rising trading channel but it is not an "F" flag like we see in the S&P. There is rising resistance near 980-990 and the 200-day EMA is currently sitting just above 1000.




The Nasdaq 100 (QQQ) closed below the 200-day EMA after a 5th attempt to move above it. The narrowing wedge formation probably means this will break up or down in the coming days. Many other charts saw breaks to the upside from these rising wedges, which actually not typical.




The Dow Transportation Index has been on quite a run since the low on January 20 and, having been in a bear market for nearly a year now, it is a major pivot point as it nears the bear market tester - the 200-day EMA.




The EFA (EAFE Index / I-fund) filled one of its open gaps and there's two more open gaps above. It is in a clear rising trading channel with no real resistance until 58. But that 58 - 59 area will be a major test to see if this rebound is more than just a bear market rally.




Here's the chart of oil which has risen 46% since bottoming last month. It broke above the longer-term resistance line. The question now is, will higher oil prices, and eventually higher gas prices, start to hurt the consumer?




Bonds yields hit the 50-day EMA on Monday and pulled back a bit. This bear flag doesn't look all that positive for yields so that means bond prices and the F-fund may be shaping up for a possible rally.




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

Tom Crowley


Posted daily at TSP Talk - Market Commentary


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