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Dow and S&P down for 4th straight day

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Stocks caught at bid at the open on Monday as dip buyers showed up following Friday's sell-off. But it didn't take long to see more profit taking kick in, and the excuse has been the decline of the Turkish lira, and the Turkish stock market. The Dow lost 125-points on the day with losses of 0.25% to 0.75% in the major indices.

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The Dow and S&P 500 have been down for four straight days - and that's the first time that has happened since March.

The small caps have been a little bi-polar lately. They have either led or lagged the rest of the market by a decent margin lately, and yesterday the Russell 2000 was one of the weaker indices falling about 0.7%, and that pushed the S-fund down about 0.6%.

The energy sector has been lagging lately, and a lot of that has to do with the dollar's rally, but now the chart of the XLE is on the brink of a potential breakdown which, if it happens, would be a drag on the S&P 500.




At the risk of repeating myself, we have to consider the situation with stocks being near the tops of trading ranges, coming off a strong earnings season rally, and it being in a low volume August trading environment. So the bears look like they have the ball in their court right now, but they haven't been too effective when they get it this summer.



The S&P 500 / C-fund tried to push into the overhead open gap near Monday's opening, and it was a solid rally initially, but it quickly failed and the index closed just south of the 20-day EMA. That's the first time that happened since the first week in July. 2820 looks like a support level but from there it would be down the 50-day EMA if the dip buyers don't show up.




The small caps (S-fund) were down sharply as they pulled back yet again from their recent high water mark.




The Dow Transportation Index hit the top of the large rising channel last week and has started to pull back. It broke below a rather steep rising support line on Friday, but closed above it. The positive reversal on Friday had us believe we could see some upside follow-through on Monday, but that never materialized and Transports ended up closing below the support line.




The EAFE (I-fund) has been getting beaten up and this is what a bear market looks like. There's always a chance that we could see a double bottom here as it tests the July low, but any short-term rally may only look to fill the overhead open gaps at best.




The High Yield Corporate Bond Fund is still holding at the 85.75 old resistance line and it is now trying to hold as support.




The AGG (bonds / F-fund) was up slightly and this chart shows another attempt at a breakout above the horizontal resistance line. We didn't see gold up, but bonds are catching a bit of a bid here as a possible safety play while this mess in Turkey plays out.




Read more in today's TSP Talk Plus Report. We post more charts, indicators and analysis, plus discuss the allocations of the TSP and ETF Systems. For more information on how to gain access and a list of the benefits of being a subscriber, please go to: www.tsptalk.com/plus.php

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

Tom Crowley



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

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