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Stocks gapped down at the open on Thursday as investors get increasingly apprehensive about a trade deal. The indices did close well off the lows so the intraday volatile swings are still around, and the Dow, down 448-points at the low, closed the day down 286. We got the normal exaggerated move in the small caps, down 1.78% (the Russell 2000 was down 2%), as well as the Nasdaq and Transports which were both down about 1.6%.
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So much for quiet pre-holiday trading. The long weekend may have investors on edge with the current headline / tweet driven market that we are living with now, and three days of no trading may heighten nerves. Traders also like to take off early before Memorial Day weekend to beat the holiday traffic on the way to setting up their summer homes, etc., so they may have been lightening up on positions yesterday before they took off.
We did get a decent bounce late on Thursday - perhaps some of those traders covering short positions - and we have open gaps on many of the charts so we could see some attempts at backing and filling. The question is whether the bears will be there to sell those rallies or, in the case of the S&P 500, are they backing off with another successful test of the 100-day EMA?
There's another level that has been a key maker or breaker since January of 2018 and that's the 2800 area. Here's a 16-month weekly chart...
Bonds and gold were the safety plays as both rallied on the sell-off in stocks. The yield on the 10-year moved to a new low hitting 2.29% yesterday.
Oil plummet 5.7%, convincingly breaking below its 200-day EMA, and the energy sector is now in a bear market - off 20% from this year's highs.
If we don't get some kind of big rally on Friday, it will be the
fifth straight weekly loss for stocks, which surprisingly would be first time that has happened in eight years.
Per tsp.gov: "Some financial markets will be closed on Monday, May 27 in observance of the Memorial Day holiday. The Thrift Savings Plan will also be closed. Transactions that would have been processed Monday night (May 27) will be processed Tuesday night (May 28), at Tuesday's closing share prices."
Administrative Note: TommyIV has been working on a
new page to consolidate some of the retirement information that is on our site. There's links to several articles and conversations that have taken place in the forum on the subject that we thought might be helpful...
The S&P 500 (C-fund) opened sharply lower on Thursday opening a gap in the process. It fell through the 100-day EMA, which has been firm support this year, but the late rally brought it back above it by the close. That created a fair reversal day, but when you have the Dow down nearly 300-points, it's not a classic positive reversal. The bear flag did break down so any short term attempt to fill the open gap will now be met at the top of the open gap, the 50-day EMA, and some descending resistance off the highs. That could be a tough level (2855) to penetrate. This looks like a good place for it to try to make a double bottom low, but if it can't do that, there could be trouble.
The DWCPF (S-fund) took a big hit losing 1.78% on the day, falling sharply below the 200-day EMA. We saw a large gap opened here as well, but it would have to get back above the 200-day EMA in order to fill it.
The Dow Transportation Index is also in a technical mess as it trades below the 200-day EMA, broke its bear flag, and fell below some rising support.
The EFA (I-fund) fell out of its bear flag so that similar formation that we saw in March did not produce the same results. I'm actually happy to see that since it's tough to use technical analysis when bear flags are preceding rallies. We want clean charts that behave typically. It is back below its 200-day EMA.
The yield on the 10-year Treasury Bond fell sharply to new lows yesterday, and since bond prices move counter to yields, the AGG (Bonds / F-fund) had a good day as it hit new highs.
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Thanks for reading. Have a great Memorial Day weekend! Let's honor those who scarified their lives, so that we can have a better one.
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Chart provided courtesy of www.sentimentrader.com
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