TSP Talk Blog

Stocks opened higher on Wednesday with the help of Apple's earnings, but there was an interesting sharp sell-off shortly afterward. Once again however, the dip-buyers were right on queue. By the close the Dow gained 52-points but percentage-wise the broader markets did not fare as well.

The S&P gained just a point, although well off the morning lows, the Nasdaq was flat, and the small caps had a bad day losing about 0.75%. The Transports were up modestly but remain in a bearish flag.

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The Dow hit 22,000 yesterday and it was hyped pretty good by the media, and it was an impressive move to get there, but to follow up on something we talked about yesterday... despite the Dow being up 52-points and the S&P being up one, 605 more stocks were down yesterday on the NYSE than up. This is not currently an equal opportunity rally.




The SPY (S&P 500 / C-fund) looked like it was going to break down from that small 5-day bear flag early yesterday but it bounced back and is now testing the upper resistance of that flag while nearly closing at an all-time high after the positive reversal day.




The DWCPF (small caps / S-fund) was sharply lower in early trading and briefly traded below the 50-day EMA and the rising support line before a modest positive reversal that pushed it back above those key levels. It needs to start moving up here or the bears may finally break this chart down.




The Dow Transportation Index was up 0.32% yesterday but you can see it remains in some technical trouble as it trends lower in that bearish F flag. Yesterday made it 5 consecutive closes below the 50-day EMA. The saving grace may be another hold at the 200-day SMA (simple moving average).




The EFA (EAFE Index (I-fund) continues to hang near the highs and most of that is because of the weakness in the dollar this year.




The dollar remains in a spiraling downtrend and that helps keep the I-fund buoyant.




But when we look at the individual market charts from Europe, we can see that there is some damage being done technically. I'll use the DAX as an example. If the dollar ever decides to bounce back, these markets could get hit hard.




The AGG (Bonds / F-fund) broke to the upside of a bear flag the other day and yesterday's action digested those gains a bit. The bear flag has been negated with that rally so now I just still see that cup and handle formation, which tend to break to the upside. Is that what we'll see here?




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

Tom Crowley


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