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Netflix leads rally. IBM flounders after close

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Stocks rallied on Tuesday with tech stocks leading the way. The Dow gained 214-points, or 0.87%, the Nasdaq gained 1.74%, and the S&P and small caps gained just over 1%. The I-fund lagged and Bonds were up slightly.

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Netflix was up 9% yesterday following their earnings report late Monday which helped make the Nasdaq the leader on the upside, however IBM was down over 5% in after hours trading yesterday after they reported their earnings report after the bell.

IBM has been a disappointing in recent years but they are not the growth company they once were so Wall Street may not be too concerned. Still, it is a Dow component so it will put some pressure on the indices today, and the Dow futures fell about 50-points initially on the news. Since the Nasdaq was the leader yesterday, we'll see if this old tech giant slows down the momentum of the tech rally. The Nasdaq futures were actually up slightly, so perhaps not.

The Transportation Index was down on the day after the chart pulled back from some resistance, but after the bell a strong report from railroad giant, CSX, may help it to bounce back today.

The difference between the 2-year and the 10-year bond yield is just 0.4% and this flattening yield curve is giving the financials some problems as far as revenue guidance. So, the financials continue to lag and that could be a concern for stocks. A bull market tends to do better when tech and financials are coming along for the ride. That bear flag still looks troubling.





The S&P 500 / C-fund rallied strongly, filled its open gap (blue), then backed off a bit before the close. It did break to the upside of its rising wedge, which is not the norm, so it's an interesting development. There is another small gap open (red) after yesterday's strong open, so that's a short-term possible pullback target. If yesterday's rally was on higher volume I might consider it a breakaway gap, but alas, trading volume remains on the light side.




The small caps / S-fund also gapped up and its high of the day hit the top of its recent tight rising trading channel. The top of that blue dashed line looks like a key area as it could turn out to be the top of the right shoulder of a head and shoulders pattern.




The Dow Transportation Index was down on the day after making a higher high, then reversing down. It filled an open gap and hit a couple of resistance levels. However, after the close yesterday CSX, a major railroad company, posted strong earnings and may help the Transports today.




The German DAX took a step forward by closing above the 200-day EMA for the first time in months, so this is a good sign for the I-fund.




The Japanese Nikkei is also back above its key 50-day EMA, but both it and the DAX need to hold for a couple of days to confirm these breakouts.




The Chinese Shanghai Index is not part of our I-fund but it has been suffering since the Tariff talks and is now on the verge of a major breakdown below recent lows. It is one of those "h" formations so it could be a successful test of the February lows, but if this does breakdown, eventually global stock markets will take notice.




The VIX has come all the way to test the 200-day EMA again, so if this area of support holds, as it did yesterday, perhaps we'll get some digestion of the recent gains in stocks for a couple of days.





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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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