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Stocks were mixed on Thursday but the late dip buying pushed the S&P 500 and Nasdaq back into positive territory by the close, although they were just slightly better than flat. Small caps, after Wednesday's negative reversal, flipped over on Thursday and had a significant loss. Nothing serious percentage-wise compared to recent gains, but the Russell 2000 failed to hold its key 200-day moving average. Bond yields were down, giving back Wednesday's gain, and the dollar was up slightly.

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The action remains choppy as the indices digest the recent big gains triggered by this week's CPI rally. That rally came on top of an already hot market in early November, so the action has been good, but probably in need of a rest. Next week is Thanksgiving week and the action surrounding the holiday has a positive bias, but as volume dries up when folks leave for their holiday destinations, the market could actually get more volatile.

The Yield on the 10-Year Treasury fell sharply yesterday and retraced all of Wednesday's move higher. It's below its 50-day EMA and the chart looks suspect and probably has lower yields coming, but I hate when big gaps are left open in the other direction because that becomes a possible target making the short-term questionable, even if the chart, in this case, looks bearish and wants to go lower.



The dollar reversed to erase the early losses, but this looks bearish as well. However, it also has large open gaps overhead so the downside becomes questionable despite the new trend lower.

Oil was down sharply again, breaking down from another bear flag. Ouch! This is good for us because we should start seeing much lower gasoline prices, but this is the global economy screaming concern over growth.



The longer term weekly chart of oil looks even more daunting as that 2-year long head shoulders pattern would tend to break down. If it does, the H&S pattern target would suggest that we could be seeing $50 in the coming months.

The Russell 2000 Index pulled back after its recent spike higher. The negative reversal day on Wednesday set up the pullback, and it has now failed at the 200 day moving averages. I won't say whether this is a peak or not, but bear market rallies tend to have trouble getting back above these moving averages.




The AAII Investor Sentiment Survey had 44% bulls this week. That's the highest reading since the late July peak, although it did get above 50 in early July.

The Senate passed the House's stopgap spending bill. Off to the President's desk it goes.

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The S&P 500 (C-fund) managed a late rally to push into positive territory after sending most of the day in the red. As I have been saying, things have gone too far too fast and it would be unusual to see the upside continue with any authority, without some backing and filling first. However, the dips buyers, the FOMO traders, and the short sellers are looking for opportunities to buy, so the dips may not be too big. So many open gaps, but time is on the bulls' side - at least as far as seasonality goes.




DWCPF (S-fund) is showing some cracks. I don't want to get too critical here since the action has been tremendously bullish in recent weeks, so predicting failure seems premature, but that was a serious negative reversal, and its' probably just a question of magnitude regarding how big of a pullback we get. Again, dip buyers may be standing at the ready sooner than we think.




EFA (I-fund) was down slightly on Thursday, and the late reversal higher in the dollar may not get priced into the I-fund price today, but it should be a negative factor over the next day or so. I mentioned up above about the large open gaps on the dollar (UUP) chart, and the fate of the I-fund in the short-term may depend on whether those get filled or not.




BND (bonds / F-fund) rallied back as yields fell to Tuesday's lows again. We've seen some great action here, but like the S-fund, it is now facing its 200-day average and with open gaps below, it may be time for another pause or pullback.




Thanks so much for reading! Have a great weekend!

Tom Crowley


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