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A 3rd gap opened...

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Stocks opened the week with a gap higher and while the indices wavered some during the day, the Dow and S&P 500 climbed back by the close to finish close to the intraday highs. The market leaders that we have been a little worried about, the Transports and small caps, had strong days but they closed off their highs and remain in or below their bear flags.

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We actually saw another gap open on Monday morning on the S&P 500, which makes three open gaps on the chart, and that's almost unheard of. The S&P closed above 2400 for the first time, and the Nasdaq also closed at a new high.

Oil continues to rally off of the recent lows as we get closer to the peak driving season, but the WTI oil chart hit the 50-day EMA and backed off giving back almost half of the larger early gains.

The S&P 500 / C-fund gapped up creating a 3rd open gap on the chart, which is really something unusual. The "exhaustion gap" back in March created a peak but the post-French election gaps have been largely ignore, which is rare. Now we have a third small open gap on the chart. The question is, can the S&P make a new leg higher without filling any of these open gaps first?

The DWCPF (S-fund) ran up to the top of the bear flag before pulling back again. It did close with a solid 0.74% gain and closed back within that bearish flag after that one-day close below it.

The Dow Transportation Index rallied yesterday but ran into some resistance at the 20-day EMA. It's early, but this could be yet another bear flag forming (dashed).

The EFA (EAFE Index / I-fund) moved up yesterday and the dollar's weakness helped push it toward new highs again.

The AGG (Bonds / F-fund) held above Friday's breakout level and above the open gap. It could be a bullish flag breakout and the support areas that need to hold for bonds to stay bullish is the 50-day EMA and the lower end of that open gap.

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:

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

Tom Crowley

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S&P 500 (C Fund)
DWCPF (S Fund)
Dow Jones U.S. Completion Total Stock Market Index (^DWCPF)
EFA (I Fund)
iShares MSCI EAFE Index (EFA)
AGG (F Fund)
iShares Lehman Aggregate Bond (AGG)