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Here come the earnings....

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Stocks rallied sharply yesterday with the Dow tacking on another triple digit gain. There was a little bleeding in the last half hour of trading and the indices fell off their highs, but there were solid gains across the board. The Dow, which was up over 400-points at the highs, gained 294-points on the day, and the major indices were up between about 0.8% and 1.6% on the day, although the small caps lagged the larger stocks with a 0.59% gain.[FONT=Arial][SIZE=3][COLOR=#000000]
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The futures were up Wednesday night but a comment from President Trump early Thursday saying we might have issues with Syria, or we might not, was a pleasant surprise to investors - the might not part - and it pushed futures up another 0.50% very quickly before the open.

The gains yesterday may be telling us that the market is starting to get numb to constant up and down waves of news coming out of Washington, and they may be starting to focus more on up coming earnings. It almost seemed like there was a lack of sellers yesterday, at least up until the last half hour, because investors may not want to be on the sidelines when earnings start to get reported - and the banks will start reporting today.

Whether that is a good idea or not, I don't know, but this first quarter of earnings during the much anticipated year of the tax cuts could set the tone for the rest of the year and there may be a fear of missing out. But like I said, that thought process may not necessarily be correct. We'll see.

I liked what I have been seeing over the last several days and the successful test of the February lows thus far couldn't have gone any smoother, but those bear flags on the charts may be trying to tell us something, and a few charts are still dealing with the 50-day EMA resistance.


The S&P 500 / C-fund had a big day Thursday but the steam came out of the rally just as it was hitting the two recent highs going back 3-weeks. The small caps already moved above their 50-day EMA and made a higher high, so is that telling us anything? Well, small caps are less impacted by the tariffs so it may be a fundamental reason. The open gap above 2700 looks like a potential upside target, but has to get above the key 50-day EMA to get there, and that may not be so easy without blockbuster earnings reports.



The PMO indicator at the bottom is moving back above its moving average, which is generally bullish, but in the short-term it could be an indication of being overbought, like we saw at the end of February. The second crossing is usually more significant, although that didn't help the index in March.


The small caps / S-fund made a nice technical move by closing above the 50-day EMA for the first time in several weeks. We like to see at least 3-closes above before being believers, but it's a start. That is still a bearish flag staring at us so there is some doubt.




The Dow Transportation Index had a big day and the small bear flag we noted yesterday is gone, but the larger one remains and the rally yesterday took it back toward the top of the flag and just below the 50-day EMA. Another big test coming up.




The EAFE Index / I-fund moved sideways as it digests its recent gains and recent breakout. The small open gap below, as well as the 50-day EMA, may be getting tested today.




This chart of the Nasdaq is quite interesting since the 50 and 200-day EMAs have been significant levels of support and resistance this year, and here it is now testing the 50-day EMA again. And, while a breakout is very possible, that is a bearish looking flag. It would make life easier for us if this opened meaningfully higher Friday morning so we get a decent idea how it will react to this resistance.




The AGG (bonds / F-fund) fell rather sharply and found the 50-day EMA for some support for now. If this counter rally off the recent lows is going to continue, this would be a good place for it to hold.




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Thanks for reading. Have a great weekend!

Tom Crowley

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

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