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Is China topping?

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Stocks were flat for most of the day on Friday, but some late buying pushed most indices into positive territory and the day ended with slight to modest gains. The Dow gained 15-points while the Nasdaq and small caps led the way.

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The typical pre / post holiday reversal didn't give us much to go on with the indices up only slightly last week, but in the case of post Christmas week, the "post holiday" may actually come after New Years."

The attention this week may turn to the action in China as their large cap stocks have been showing signs of cracking in recent weeks after peaking way back in October. See the chart below.



The SPY (S&P 500 / C-fund) has been in a long flag formation after peaking and consolidating for the last two weeks. We did see a minor breakout then a minor breakdown from the flag last week, but nothing definitive yet. This type of flag is generally bullish but the last week of the year, particularly since last week was positive, and start of a New Year can be less than predictable as money managers juggle profit taking and window dressing for their portfolios.




The weekly chart of the S&P 500 shows that the previous week's high is still the high and the chart has so far held at that rising resistance line. As we mentioned last week the path of least resistance appears to be down, but seasonality is still on the bulls' side for the most part.




The DWCPF (S-fund) is also in some kind of a flag formation with a possible lower high being made but that would not be official unless it moves below the prior low near 1150.




The Dow Transportation Index remains in a modest pullback off the December 9th high. It is testing the 20-day EMA and that has held so far for a couple of days.





The EFA (I-fund) was up but remains in a more bearish flag with a couple of open gaps down below.




This Chinese large cap index fund has been slipping lower since its previous lower high, and you can see that this actually peaked way back in October. China is not part of our I-fund and so far this action has not bled into the Japanese or other global markets, but it down almost 12% from that peak and it may start getting attention if it can't hold on here as it is looking like possible major topping action.




The AGG (bonds / F-fund) was up slightly on Friday although it closed off its highs so this may still be considered a bear flag rather than a "V" bottom. You can see the important resistance area of just over 107.50. A move to 108 would be a good sign for bonds as the next level of resistance would be all the way up near the 50-day EMA at 108.6.




Read more in today's TSP Talk Plus Report. We post more charts, indicators and analysis, plus discuss the allocations of the TSP and ETF Systems. For more information on how to gain access and a list of the benefits of being a subscriber, please go to: www.tsptalk.com/plus.php

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

Tom Crowley


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


The legal stuff: This information is for educational purposes only! This is not advice or a recommendation. We do not give investment advice. Do not act on this data. Do not buy, sell or trade the funds mentioned herein based on this information. We may trade these funds differently than discussed above. We use additional methods and strategies to determine fund positions.

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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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