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Wal-Mart to the rescue... for a day at least

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The volatility continued on Thursday, this time with a rally in stocks that erased Wednesday's big losses. The back and forth action may be making investors sea sick... welcome to mid-August trading. The Dow, led by Wal-Mart, gained an impressive 496-points, or 1.58%.[/COLOR] The gains in the broader indices were more muted, but impressive none the less.

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The Whitehouse Economic Advisor Larry Kudlow stated that "we are crushing it", in regards to the U.S. economy, and that set a positive tone for the day, but Wal-Mart was the real show stopper as it rallied over 9% on the day, and that had a lot to do with the Dow's near 400-point gain.

The chart of Wal-Mart is interesting in that it opened on Thursday morning right up to the top of the large open gap created in February, but that was the high of the day. The strong open also created a new gap down near 90, but who knows when or if that will get filled any time soon since the last gap took 6-months to fill.




We got a bit of a disappointment out of Nvidia, which we touched on yesterday. The semiconductor sector index was on the verge of a possible breakdown so some were looking to Nvidia to help out - being the new darling of the semiconductors. Unfortunately it came in a little lighter than their whisper number and guidance was weaker than expected. It was down about 5% after hours to 245 and 250 looks to be a key support area so we'll have to see how it opens on Friday.




The action is choppy and as we've said, it's been tough to trust any big move since momentum is not on anyone's side at the moment. The charts look OK, but have some issues with overhead resistance, while support has also held so it's a battle within some trading ranges.




The S&P 500 / C-fund gapped up on Thursday and ended the day with a strong 0.79% gain. It filled that open gap from earlier in the month, but left a small gap open down near 2830 in the process. So that's now two open gaps on the downside. There was a bit of a negative reversal as the indices closed off their highs, so we'll see if that means a little weakness to start the day on Friday.




The small caps (S-fund) continue to bounce between the top and bottom of the narrowing trading channel. The overall formation of the channel is fairly bullish (cup and handle) but the negative reversal could mean a little more downside or test of support, before any elusive breakout.




The Dow Transportation Index popped up to a new high before backing off before the close. There's a double dose of resistance at yesterday's high but the chart doesn't look bad at all - maybe some short-term weakness because of the negative reversal.




The EAFE (I-fund) finally had an up day but it ran into the the old support line and stopped. There are a bunch of overhead open gaps that should be an oversold rally's lure, but the trend is down and any upside may be short-lived.




The AGG (bonds) rallied again although the TSP gave the F-fund a loss - could be a fair value adjustment. The chart
is looking like it wants to breakout. It technically has already but it is still close enough to the resistance line that we probably want to see 3 to 5 closes above it before confirming. If the dollar can keep rallying, it would make sense to see a breakout.




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Thanks for reading. Have a great weekend!

Tom Crowley


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