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Stocked opened lower to start the new week, and the selling intensified throughout the morning, but by early afternoon we did some some buyers show up to push the broader indices off their lows, although it was still a very red day. The Dow closed down 234-points as we saw 0.75% to 1% losses almost across the board. The I-fund outperformed because of another pullback in the dollar.

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Gold and bonds rallied so the safety trade was certainly on, and if that continues during the week, it tells us that dip buyers may not as opportunistic as they have been, but we'll see. That's just one day down after a pre-holiday rally, and if you've been reading these commentaries you know a reversal down after a pre-holiday rally was not a big surprise. Basically the S&P 500 gave back Thursday and Friday's gains.

The bomb that the North Koreans tested over the weekend certainly played a role but as if Harvey wasn't enough, Hurricane Irma may be headed for the Florida Keys or even the Miami area, and it could be stronger than Harvey. And Jose has a chance to head toward the North East and land near NYC, although we know those forecasts can change.

Insurance companies are getting hit hard because of this new wave of hurricanes. Financial stocks were down as the 10-year T-bill yield slid to its lowest level in a year, under 2.09%, and that is certainly a sign that the Fed may not raise rates in December.

Tax reform talks continue in DC and that may be what keeps this market buoyant, at least until some resolution, or lack there of, is announced.
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* When I started to put together the charts for this commentary, my normal chart service's website was down, so we have a awkward mix of charts, but that's just for today.

The SPY (S&P 500 / C-fund) pulled back sharply but you can see by Tuesday's candle formation that it closed off the lows creating a possible positive reversal day, but it would have been more convincing had it closed closer to the highs of the day. A small gap was opened near 248 and that could be an initial target should the upside resume. The blue arrow shows that yesterday's close put it back to were it was at last Wednesday's close so we lost Thursday and Friday's pre-holiday gains.




The DWCPF (small caps / S-fund) pulled back, filled two open gaps and rebounded off of the 50-day EMA. This chart doesn't look too bad at all despite the 1% decline. If there is an issue it would be the lower high potentially forming.




The QQQ (Nasdaq 100) broke above a large bull flag last week and now it is retracing some of those breakout gains and we'll be looking to see if the top of the flag can now hold as support.




The EFA (EAFE Index / I-fund) was down and filled an open gap on the way. It is in a possible bear flag, and though it's not shown on this chart, it remains above the 50-day EMA.




The dollar was down again and that's helped the I-fund to outperform. A gap was filled with yesterday's decline so we'll see if that acts as some kind of support now.




The AGG (Bonds / F-fund) was up but settled well off the highs. It was an early safety play, as well as gold, but it came off those highs as stocks started to rebound.




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

Tom Crowley


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