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TSP Talk: Dead cat bounce or is the low in?

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Stocks bounced back on Tuesday after the positive reversal day on Monday, so the action was typical, but the question of course is whether this cements in a low for this recent pullback, or if the market is just rebounding to fill in some open gaps on the chart, and / or if new overhead resistance will keep the downtrend alive. The Dow ended the day up 140-points and there was green almost across the board, and that ended a 4-day losing streak for the S&P 500.

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Internally we didn't see any major strength, but certainly improved over the prior week. The Nasdaq actually saw more down issues than up yesterday and more new 52-week lows than new highs, but of course those big techs get most of the attention and are heavily weighted in the indices, and the advancing volume was higher than the declining. The NYSE did get more advancing issues, but the up/down share volumes were about even.



As for the S&P 500; a small gap that was created on Monday was easily filled yesterday (blue), and there is another open gap up by 3380. The positive reversal was impressive but technically the bear flag is still intact and so far the bounce has only pushed it up to the old support lines and the 50-day EMA, and both could now act as resistance.




That resistance may not hold being that the S&P 500 has been so strong for many months, but we're reminded that the Equal Weighted S&P 500 (same 500 stocks) was only up half of what the S&P 500 was up so the indices may have to rely heavily on those same old big tech stocks to do most of the heavy lifting again.



And I'll keep this up for another day in case you've forgot what September is all about...


Chart provided courtesy of www.sentimentrader.com



The S&P 500 (C-fund) followed through Tuesday with more upside after Monday's positive reversal, and that's typical action. However, the chart is still in a predicament.




I'm not particularly bullish, nor super bearish here, but I know that markets will rebound in downtrends, and those rallies don't always last. Because the S&P is below the 50-day EMA right now, we should be a little more on guard for bearish activity. Remember all of those big rallies during the March sell-off? Until we saw a low, every rally could have been sold.




The DWCPF (S-fund) had a solid day and this one did make it back above its 50-day EMA, but it is still in a downtrend and below several broken support lines.




The EFA (I-fund) lagged yesterday and much of that had to do with another rally in the dollar.




The good and the bad from yesterday - those large cap tech stocks rallied nearly 2% on the day, lifting most of those major indices higher. Below that however we see that the Financial sector is still in some trouble after losing another 0.84% yesterday. Whether that leaks into the broader market, I don't know. It's not as if the herd is holding their breadth to see what the banks are doing, as they are with tech.




BND (F-fund) was up slightly but it is still stuck in the mud near that 50-day EMA and in that trading range marked below.




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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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SPY (C Fund) (delayed)

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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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