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Bulls digging in, but possible resistance overhead

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Stocks opener higher on Monday, following-through on Friday's big positive reversal day. The Dow ended the day up 410-point. That was about 140-points off the highs and it may have hit some resistance, but still quite impressive. With volatility remaining fairly high, these wide swings could continue for a while.
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As we mentioned a few times last week, the rallies after major corrections can be explosive, and if you look at how far we have come since the Friday early afternoon low, I'd say that qualifies as explosive. The Dow gained 1400-points from Friday's low to Monday's high.

I'll post this chart of the 2015 and 2016 corrections again to remind us of a possible outcome. These rebounds do not always end up as "V" bottoms, but instead can come back down to retest the lows. Just keep that in mind if this starts reversing again.

The S&P 500 / C-fund reversed and rallied convincingly off of the 200-day EMA late last week. This has all the hallmarks of a market "V" bottom, but until we see new highs, there's always the chance of a retest of those lows. One scary thought... there is a descending parallel channel near the lows so there's a bit of a chance that it failed at descending resistance at yesterday's highs.

The small caps / S-fund also successfully navigated the 200-day EMA. There is a parallel descending channel being tested now. The 20-day EMA is about to cross below the 50-day EMA, which is an intermediate term warning sign, but it can also be a short-term oversold indicator so this rebound off of oversold levels seems normal.

The EAFE Index / I-fund also held at the important 200-day EMA and with all of those overhead open gaps, there are some upside targets there for the taking if it can hold up that long.

The High Yield Corporate is well of its lows but it had fallen below its 200-day EMA, and now it is about to test it again from below. It could act as resistance now, on the way up, and how that resolves could be an interesting clue for stocks.

The short-term indicators have already moved up close to the neutral lines so it may not be long before we know if this rally is going to run out of steam soon.

The AGG (bonds / F-fund) didn't do much to come off its lows yesterday and the 10-year Treasury Yield actually made a new high early yesterday, moving over 2.9% before closing at 2.86%.

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:

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

Tom Crowley

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