TSP Talk Blog

The ECB decision did not disappoint the traders as we saw wild swings on Thursday with Dow up 130-points early on, then down almost 180-points at the afternoon lows, before closing down just 5-points. The indices were mixed as the S&P 500 closed up fractionally, the Nasdaq closed down 12-points, and the small caps lost about 0.6%.

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The European Central Bank cut their benchmark interest rate to 0% and extended their QE bond buying program. European stocks and U.S. futures rallied, and that rolled into a strong open for U.S. stocks, but that rally quickly faded after ECB President Mario Draghi suggested this cut may be the last.

Next week it will be the Bank of Japan's turn on Tuesday, and the FOMC has a two-day meeting starting on Tuesday with a policy statement on Wednesday I believe.

Yesterday's action was strange and emotional so it's not easy to interpret, but the S&P 500 (C-Fund) fell below the rising wedge formation and closed below the 200-day EMA again after just one close above it, and that is telling and potentially bearish but the bulls do not seem to want to give up yet.




The small caps (Dow Completion Index / S-fund) broke below their rising trading channel and they are now depending on the 20 and 50-day EMA's for support.




The Dow Transportation Index broke below a short-term rising support line but remains in a larger rising trading channel and above the 50-day EMA. Nothing is too broken here, but the big problem is that it has failed at the 200-day EMA - the bear market rally killer.




The German DAX rallied strongly after Draghi's rate cut but fell sharply into the close. It may bounce back some on Friday morning after U.S. stocks rallied late on Thursday but this is an ugly formation as it is now. It is back below the 50-day EMA and the rising support line after creating an awful looking negative outside reversal bar.




The AGG (Bonds / F-fund) remains in a bullish looking flag / pennant formation after a rather flat day on Thursday.




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Thanks for reading. Have a great weekend!

Tom Crowley


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