TSP Talk Blog

Stocks opened flat on Monday but quickly sold off and before long the Dow was down 145-points. By about noon ET the bleeding stopped and stocks caught a bid and closed fairly strongly, although still in negative territory. The Dow closed down 13-points with more moderate losses in the S&P and Nasdaq, while small caps struggled.

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The market has been struggling in general having peaked about a month ago in several indices. The pullback has been fairly muted with key support levels have been holding up, but volatility has been creeping back in. The Transports have lagged and as the market leader, that's not something the bulls want to see. Small caps have also been flashing some warning signs but there has not been any major damage done to that chart yet so it may still be just a healthy pullback. Keep an eye on those Transports. They are trading just below some key resistance, but there may be a bull flag forming. See the charts below.

This Friday we will get the March Jobs Report and estimates are looking for a gain of about 180,000 jobs and an unemployment rate of 4.7%.

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The SPY (S&P 500 / C-fund) remained below the descending resistance line but it managed to make a positive reversal on the day, and close just above the 20-day EMA again - for a 5th straight day. The negative reversal day on Friday did produce the follow-through selling we suspected could happen, but now this positive reversal day gives the S&P a more bullish short-term outlook to at least start the day on Tuesday.




Unfortunately, that is not the case with the DWCPF (S-fund) since we didn't see the same type of reversal. It did test and hold at the 50-day EMA and that may be enough to bring in some buyers today, but it must stay above that 1185 level otherwise it may quickly retest the March lows.




The Dow Transportation Index lagged yesterday after losing 0.33%, and it failed again at the 50-day EMA which it has now traded below for almost a month. I do see a possible bull flag forming and that could be a good sign. But I think we need to see oil move back over $51 a barrel to see that flag breakout to the upside.




The EFA (I-fund) put in a classic positive reversal day despite the small loss. It nearly tested the lower end of its rising trading channel but it was able to reverse up before hitting it. It's not shown on this chart but the 20-day EMA is sitting at 61.83, right where the EFA found support.




The AGG (Bonds / F-fund) broke out from its bull flag on Monday and above the descending trading channel (red). There is a rising trading channel (green) that seems to be in play now as the bond market looks a little better here.




This chart shows that people are getting quite bearish on bonds, and that may be a bullish sign going forward. If there's a "it's different this time" excuse, it would be that bonds had been in a major bull market for decades, but with interest rates rising there's reason to believe that the long-term outlook for bonds is not as bullish. But in the short-term? Maybe.


Chart provided courtesy of www.sentimentrader.com


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

Tom Crowley


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