TSP Talk Blog

Stocks opened lower on Monday, and while the bulls didn't make any serious attempts to buy the dip, the bears really weren't able to put the pedal to the metal on the downside either. The Dow lost 95-points (about -0.5%) and the broader indices were also down about 0.4 - 0.6%.

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The European markets took a hard hit yesterday, but the dollar was down and that helped cushion the blow. Plus Friday's overly negative I-fund price was paid back in Monday's price.

The action wasn't great yesterday, but it wasn't all that bad either. The problem, as you will see in the charts below, is the inability for the major indices to push past key resistance. The bulls don't seem to have it in them right now, but the bears aren't taking advantage of the bulls' weakness either. One positive is that volatility seems to be backing off some. Remember the 200-400 point swings in the Dow we were seeing not long ago?

The SPY (S&P 500 / C-fund) pulled back for a second day after breaking above the wedge's resistance line last Thursday. The modest dip did find support at the old resistance line, which is what the bulls would be hoping for. The resistance line is moving downward and perhaps the slowly rising 50-day EMA will provide another layer of support if or when the two meet.


Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk

The Wilshire 4500 (S-fund) fell below some key support and will now face the pesky 1058 breakout area again looking for support.


Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk

The Nasdaq 100 (QQQ) ...


Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk

... and the Dow Transportation index, two of the market leaders, both recently moved back above their 50-day EMAs but they have failed to make higher highs, and the Transports fell back down below the 50-day EMA. There is some concern here with this action, although the 50-day EMA hasn't been a critical area of support and resistance for the Trannies lately. Both have some drop dead support lines that, if retested, must hold.


Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk

The EFA (EAFE Index / I-fund) failed to hold above the 200-day EMA after breaking above it last week. We knew the small open gap could be a short-term downside target if it pulled back, and now it has so the bottom of the rising channel is the next test - and then 50-day EMA.


Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk

The AGG (Bonds / F-fund) tried to rally but it closed near the day's lows so this pullback in bonds is continuing. The open gap could get some attention in the short-term but this looks destined to make an attempt to test the 50-day EMA again.


Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk

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

Tom Crowley


Posted daily at TSP Talk Market Commentary

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