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Working off the excesses of jobs report rally

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Stocks opened sharply lower on Tuesday but buyers stepped up right away to take the indices off their lows and into positive territory, before fading and closing slightly negative. The Dow lost 28-points after Monday's triple digit decline and that's just something we tend to see after a big jobs report driven rally.

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The bulls may have preferred to see Friday's rally continue into this week, but jobs reports, like the FOMC meetings (and there is one today), bring out such emotional activity that it is often over done. As I talked about on Monday, that big jobs report was kind of a Goldilocks report with the Fed firmly on hold for now, with little chance of a rate hike anytime soon.

But the China trade deal is still front and center with a December 15 tariff deadline coming up, and with that hanging over the market it wasn't too unusual to see a couple of days of profit taking after Friday's rally.

Washington has been quite active in recent days with the USMCA deal being reached (the NAFTA trade replacement), the impeachment vote coming our way, and the FISA abuse report out with some controversial information, and the market is basically shrugging it all off with a flat day of trading.

As the December seasonality chart shows us (at the bottom of the commentary page), we are the middle of the mid-December lull for stocks before the Santa Claus rally season kicks in, and I would say that on average, that lull runs through the 20th of the month historically, but of course headlines matter and seasonality is not a primary indicator, until maybe the last 10 days of the year. Of course nothing works 100% of the time and there is always risk involved.




The S&P 500 (C-fund) pulled back sharply at the open on Monday, nearly filled in the open gap from Friday, but not quite yet. The bottoms of those gaps are always possible downside targets. The rising trading channel (blue) broke several days ago and now the bottom of the channel is showing signs of wanting to act as resistance.




The DWCPF (S-fund) did fill one of its open gaps, with another open down near 1460. This channel is also broken and the bottom is acting as resistance here as well.




The Dow Transportation Index was down fairly sharply on Tuesday, lagging the big three, and it is back below the 50-day EMA after a couple of days above it. That looks like a head and shoulders pattern forming and the 200-day EMA, where the neckline is passing, is the key support area that needs to hold or 10,000 becomes a possible breakdown target area - plus there's an open gap near 10,100.




The EFA / I-fund has remained buoyant with the help of the dollar which keeps sagging. The chart looks good and the more it knocks on that resistance at the highs, the more likely someone is going to let it in. So far the bulls haven't been able to push it across that line.




The weak dollar has been pushing up the price of oil and copper recently, and this chart of copper looks particularly intriguing as it tries to break out of a long 7+ month basing formation. This may be a sign of economic improvements, but let's see if it can hold above that breakout area for a few days first.




The AGG (F-fund / bonds) broke above that bull flag in November and since then it seems to be digesting that move higher. In the process it continues to hold above that bull flag and looks good as long as that flag, and perhaps the the 50-day EMA, is holding up.




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

Tom Crowley


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

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S&P500 (C Fund) (delayed)

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

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

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

(Stockcharts.com Real-time)

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