TSP Talk Blog

Stocks opened higher on Monday, opening a new gap on the charts, but we did see some deterioration as the day went on. The indices closed with decent gains although the 129-point early gain in the Dow turned into a 77-point gain by the close. The Nasdaq led with a 1% gain, closing at the highs as big tech stocks are leading the way.

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The AT&T / Time Warner merger did spark some optimism in the market, although ironically both of those stocks were down on the day. But mergers, acquisitions, and IPO's are generally done when the participants believe the market conditions are favorable.

The charts improved in some respects, but not completely. The S&P and the small caps gapped open above the important 50-day EMA but the small caps could not close above it after losing ground from the strong open.

The SPY (S&P 500 / C-Fund) and the indices in general gave us a lot of mixed messages yesterday. We saw a strong open above the 50-day EMA but the excitement stopped there in many indices with the small caps falling back below the 50-day EMA by the close, while the Nasdaq 100 (QQQ) closed at all-time highs.

Was the rally on Monday just another lower high in a descending trend? Is the SPY going to pullback to fill the open gap near 214, or will it continue to move higher to fill the gap up near 216? It's still quite unclear but being back above the 50-day EMA is a start. The bear flag is not out of the picture yet, either.




The DWCPF (S-fund) is not back above the 50-day EMA despite moving above it in early trading. The bear flag remains intact so this chart does still need some help.




The Nasdaq 100 led all indices with a 1.2% gain and a close at new all-time highs. There is an open gap now near 118, but overall this has been a leader having never really given up the 50-day EMA, except for one close, since the post-Brexit rally.




The EFA (I-fund) was flat and this chart continues to try to negotiate its 50-day EMA and is barely holding on. The dollar hitting a 9-month high isn't helping and is in fact a big reason why the I-fund is lagging the U.S. stock funds.




The AGG (Bonds / F-fund) was down and back below the 50-day EMA. The head and shoulders pattern I mentioned yesterday seems to be playing out as we see some resistance in the right shoulder.




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

Tom Crowley


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