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Despite some tumultuous intraday action, the indices closed mostly flat on Monday following Friday's sharp sell-off. I'd give the bulls the nod since the bears took control early but could not keep the pressure on. The Dow gained 15-points while the the S&P and Nasdaq saw slight losses. The small caps fund led with a modest gain, and the Transports lagged again and fell below its March low.

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The yield curve is still the major concern, and it remained inverted yesterday. We can see in this chart that compares yesterday's trading in the S&P 500 to the yield on the 2-year Treasury Note, that investors are watching closely.

Chart source:

The heart of earnings season is still a few weeks out and the market will be looking for a catalyst while we're waiting, and for now I think the yields will be the focus. Of course we could start getting earnings warnings in the interim, and that could provide some fireworks as well.

Many expected some kind of a rally off of the Trump exoneration but I think the market had shown little interest in this for a long time ago.

The S&P 500 (C-fund) closed just above the 20-day EMA yesterday, after a brief visit below it, and it remained below that key 2815 (and 2800) level. Today's action should be interesting because any upside that the bulls can muster will be met by those old 2800 and 2815 resistance levels. The spinning top candlestick formation is one of investor indecision, after it closed about where it opened, but traded in a fairly wide range. Again this gives the bulls a slight nod in that these spinning tops can be reversal formations but we all know about that resistance area.

The PMO indicator above has now crossed below its moving average for a second time, and as I've mentioned before, sometimes we get the bigger move on those second crossovers, and that's where the bears may have an advantage.

The DWCPF (S-fund) held at the 200-day EMA again, which is always a good sign, but one of the driving forces for the S-fund is the small caps of the Russell 2000. It's not shown, but the Russell closed below its 50 and 200-day averages for a second straight day.

The Dow Transportation Index was down on the day again, making a slightly lower low on the day, and it is now trying to hold onto 10,000. Should that break down, there isn't a whole lot of support below for this market leader.

The EFA (I-fund) was up slightly and it's holding above that strong support in the 64.00 - 63.50 area on this chart, that really needs to hold.

I was wrong about the positive reversal on yields on Friday as we saw yet another low in the yield of the 10-year Treasury, but also another kangaroo tail reversal.

The AGG (Bonds / F-fund) made yet another new high and the F-fund looks good, but this is getting so stretched that I wouldn't put any short-term money to work here. There's an open gap that could get filled, and that 108 area may be a good area to look for some support, with 107.10 the next level of support after that.

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

Tom Crowley

Posted daily at

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  1. userque's Avatar
    [QUOTE=tsptalk]...Many expected some kind of a rally off of the Trump exoneration but I think the market had shown little interest in this for a long time ago. ...[/QUOTE]

    Just an FYI, the report summary clearly indicated that the report didn't exonerate Trump.

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