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Oil, stocks dip

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Stocks were down yesterday as the price of oil dropped sharply, and investors are preparing for some big name earnings reports this week as well as the FOMC meeting and policy statement on Wednesday. The Dow lost 78-points on the day, and the S&P 500 and small caps lost about 0.3%.

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Earnings from Google (Alphabet), Apple, Facebook, and Amazon this week could set the tone going forward but then again any hints from the Fed this week could also move the market. I still believe the Fed will remain on hold and not cut rates until after the election, but that doesn't mean they won't say something to spark speculation.

Retail stocks have been performing very well, and the S&P Retail Index was actually up 1% yesterday, so maybe the consumer is back in business. Oil and retail stocks tend to move in the same direction but since about April, they have been moving in opposite directions, whatever that is trying to tell us.

The price of oil has been moving lower since the peak in early June and it it has now moved below the 200-day EMA, although it has created what may be a bullish falling wedge formation.



How much the 2.4% decline in oil had to do with yesterday's losses in stocks is questionable, but of course the Dow and S&P have large oil companies within them. So this could be back on the radar as a market catalyst.

The SPY (S&P 500 / C-Fund) lost 0.27% on Monday but closed off the lows and remained in the flag formation that we have been watching. The angle of the flag makes me wonder if it will break out like a bull flag, or if it is an "F" flag which tend to continue in a slow grind higher until it breaks down eventually. Bull flags tend to point more downward while "F" flags move upward in a slightly higher angle. Interesting setup here.




The DWCPF (S-fund) is floating above its flag formation as well. It looks fairly bullish for now, but that open gap is a concern for the short-term if the flag breaks down.




The Dow Transportation Index is showing a more traditional bull flag with its downward sloping angle. The support looks formidable as the old descending resistance line is about to meet the 200-day and 50-day EMAs. Remaining on top of all of those is a bullish sign.




The EFA (I-fund) remains above the 200-day EMA and in some kind of bullish flag / pennant formation.




The Credit Suisse High Yield Bond Fund fell sharply early on Monday but closed well off the lows and may have created another positive reversal day. It is a bullish sign for stocks if these high yield funds are moving up.




The AGG (Bonds / F-fund) remains below the old resistance line (blue) and in a bear flag. The Fed's policy statement could determine which way this breaks, but right now it looks bearish for bonds.




Administrative Note: The TSP Talk PGA Championship Golf Tournament Contest is starting this week. Go here for more information!



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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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