TSP Talk Blog

Stocks rallied sharply yesterday after Monday's big sell-off as the market tried hard to take advantage of Turn-around Tuesday, but was it enough to give the "all's clear?" The Dow gained a solid 389-points but that didn't quite recapture all of Monday's losses so at this point we still see the indices chopping up and own near the recent lows.

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Yesterday's action did little to remedy the poor technical analysis picture, but it's a start. This could break either way. Our indicators suggest stocks may be due for some relief, but the bear flags are still all over the charts, and that's not good. We need to see more follow-through to the upside.

Earnings season is getting closer and it could make or break this market. Because of the tax cuts there have been high expectations so companies better deliver - at least on future guidance. The rally was based on what the tax cuts can do for companies' bottom lines, and if that doesn't turn out to be what was advertised, the big gains from 2017 and the beginning of 2018, may be taken completely away.

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The S&P 500 / C-fund move back above the 200-day EMA, which is a good step forward, but those bear flags are still there, and depending how you drew in your lines, the bounce yesterday only made it back to about the bottom of the small bear flag. Holding here would be a nice clean place for a correction test to complete, but will the market cooperate?




The small caps / S-fund are in the same situation with a clean hold at the 200-day EMA so far, but it is still in a downtrend.




The Dow Transportation Index -- same thing. I think the chart says it all.




The large tech stocks of the Nasdaq 100 led this market higher last year, and this correction has beaten them up rather severely. And now, like the other charts, it is down testing the 200-day EMA.




The EAFE Index / I-fund continues to flirt with the 200-day EMA and with the dollar rallying of late, it has some additional pressure. I don't know how many times that EMA can be tested before it breaks, but even if it does, the February lows may provide some possible support.




The AGG (bonds / F-fund) was down on the day and it is looking for the 50-day EMA and the top of the old bear flag for support.




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

Tom Crowley

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