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The market feels like it's behaving normally again, but will that be a good thing?

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Stocks opened higher and closed lower on Wednesday, as it has done all week. The Dow shed another 249-points, even after the announcement of the new top Economic Advisor, Larry Kudlow. Since the market peaked in late January the Dow has had a triple digit move (up or down) in 23 of the 32 trading days so volatility remains alive and well, and that tends to mean the indices are still vulnerable.
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The Dow had gained 441-points on jobs report Friday, and as we've been talking about, there is a tendency for big rallies after a jobs report to reverse those gains in the following days, and so far this week the Dow is down 578-points.

Not all indices have done so. The S&P 500 is still up about 10-points since Friday's close, and the Nasdaq has only given back about half. Still, that's a decent pullback and it's actually refreshing to see the market, which had its first 10% correction in 2.5 years last month, start to act more "normally", or at least like it used to. We even had negative follow-through to Tuesday's negative outside reversal patterns. Normal!

The S&P 500 / C-fund broke above that descending resistance line last Friday and has since settled down to retest that line. It happens to be in the same area of the bottom of the open gap from the jobs report rally last week and, if we include the rising support line off the lows, there is a triple dose of support near 2780 or there about. If that breaks, we could be seeing one of those fake-out / breakdown pennant patterns.




The Dow has been lagging since the tariff talk and unlike the S&P, Nasdaq, and small caps, it has not made a higher high but is close to making an official lower high.




[SIZE=2] The small caps / S-fund is back within that flag-like formation but technically it is still in decent shape. However, it could remain in good shape even if it moves all the way to the bottom of the flag so there's lots of room in this rising channel / flag formation.




The Dow Transportation Index pulled back from its small double top formation and, after a nasty day of trading yesterday, it is all the way back down testing the 50-day EMA again.




The EAFE Index / I-fund just doesn't look good to me at this point. That 50-day EMA has held stubbornly as resistance and that is one big bear flag with an open gap still below to potentially be filled.



The AGG (bonds / F-fund) had a nice day yesterday but it failed at some critical resistance. The 50-day EMA may get a shot here, but I don't know how long this bear flag can hold up. Bonds do tend to surprise me more than any other chart so you never know, I guess. The surprise here would be this turning into a bottom for bonds. Can that happen in front of 4 potential interest rate hikes by the Fed this year?




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

Tom Crowley


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

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