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A day of pondering on Thursday

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Stocks pulled back on Thursday so they could not follow-through on Wednesday's monster rally, but the gains on Wednesday were so big that a little profit taking seemed reasonable. After all the S&P was up 4.25% this week coming into the day, and that's a pretty healthy gain, and with the indices approaching some resistance, investors opted to take something off the table.

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The Fed minutes came out in the afternoon and it basically reiterated what Jerome Powell said on Wednesday - that a December rate hike is pretty certain, but the 2019 situation will be data dependent. That gave stocks a boost and pushed the indices into positive territory, but a late decline gave stocks slight to modest losses pretty much across the board by the close.

With the G-20 summit in progress there could be some market moving announcements, but it may not be until Monday before we know anything - at least as far as the markets being open and reacting.



The S&P 500 / C-fund slowed down after Wednesday's big rally, and stalled at the 50 and 200-day EMAs. There's also some descending resistance in the area, although we saw some other indices take that out this week. That could be a big bear flag in blue, but it is so big that there is a lot of room on both the top and the bottom of the current level so I'll stick with the other resistance for now, and we'll revisit the bull flag as it develops -- or not.




In 2011 the markets were acting similarly to what is happening today and that was a big bear flag that eventually cracked, but it set up a good buying opportunity that ended up being a bottom that was never touched again since.



Perhaps that was the "whooosh" low that many are waiting for this time around, before this thing really bottoms? I'm not saying we're going to be making a market low, but low or not, there's a fairly decent chance we revisit the lows again at some point before making new highs - even if it's a short-term "whooosh!" I'm guessing that we don't make new highs anytime soon, but as we've talked about many times, bear market bounces can be explosive, and Wednesday showed us that.


The DWCPF (S-fund) was down slightly but now that it is above the descending resistance line off the previous high, there is some room up to the 1360 area if the bulls can keep the pressure on.




The Dow Transportation Index pulled back rather sharply but held at the 200-day EMA that it broke above on Wednesday.




The I-fund is also above some resistance and has some open space above it, along with some open gaps that might like to get filled. But it is still a broken chart otherwise.




The dollar has been a pretty good tell for stocks. Since it rallied off the September lows and remained in that rising trading channel, the S&P 500 has struggled. Right now it is testing the bottom of that channel and if you are a bull looking for stocks to rally, you would probably want the dollar to break below that channel.




The AGG (bonds / F-fund) tried to get above the 200-day EMA but failed and closed below it. This could be a little toppy for bonds here, but a breakout would be very interesting. I suppose it would be the bond market suggesting interest rates are not going much higher. As a matter of fact, they seemed to anticipate the Fed's speech about getting near neutral since bonds have rallied and yields have fallen since the lows about a month ago.




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Thanks for reading. Have a great weekend!

Tom Crowley


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SPY (C Fund) (delayed)

(Stockcharts.com Real-time)
DWCPF (S Fund) (delayed)

(Stockcharts.com Real-time)
EFA (I Fund) (delayed)

(Stockcharts.com Real-time)
AGG (F Fund) (delayed)

(Stockcharts.com Real-time)