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Consolidating

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Stocks were mixed yesterday despite the Dow being up for an 8th consecutive day. We saw minor to moderate losses in various indices as the charts try to form some kind of base or consolidation after the recent steep rise. Volume has been light so earnings reports could shake up the market a bit. Yesterday after the close it was Microsoft who posted a strong quarter and stocks were up in after hours trading.

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The light volume is typical summer doldrums but the bears seem to be the ones on vacation as they have not been able to press on the downside despite some severely overbought indicators. It seems the wall of worry is still winning out as the underinvested buy the dips. With yesterday's losses we'll see how far behind those dip buyers are.

July's seasonality chart gets less appealing during the second half of the month, historically...


Chart provided courtesy of www.sentimentrader.com

But as we've been saying, during election years it tends to do fairly well with just some choppiness during earnings season.





The SPY (S&P 500 / C-Fund) may be creating another bull flag and that's the kind of consolidation that we were looking for. Sideways to slightly lower action after a big spike up can be all that is needed to give it the strength to make another move higher. The indicators are still very overbought so more downside is possible, but I would think that the 213 area would be strong support if it does get down that far.




The DWCPF (S-fund) was the laggard yesterday as it continued to move sideways for a 5th day. The June high and the open gap near 1055 would be a downside target and possible support on any weakness.




The Dow Transportation Index has pulled back although it has been closing well off the daily lows the last two days while forming what looks like another possible bull flag.




The EFA (I-fund) fell back below the 200-day EMA after holding above it for a handful of days. The strength in the dollar was too much for the I-fund to handle, plus there are several open gaps below that are begging for attention.




The AGG (Bonds / F-fund) was up slightly as it tried to find support at the 20-day EMA, but that old resistance line, which it fell back below last week, is in the way again. The next open gap on the downside is near 112.00, also where there is some rising support coming up.




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

Tom Crowley


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

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S&P500 (C Fund) (delayed)

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DWCPF (S Fund) (delayed)

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EFA (I Fund) (delayed)

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BND (F Fund) (delayed)

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