Indices are barely hanging on

Stocks opened weakly again, and we did see buyers step up once again, but they could not get enough traction to push the indices into a strong close.  The Dow lost 46-points, well off of the 150-point decline earlier in the morning, but resistance continues to put pressure on the indices.

                                   
For the TSP, the C-fund lost 0.60% on Friday, the S-fund fell 0.64%, the I-fund dropped 0.68%, and the F-fund (bonds) added 0.04%.  

The S&P 500 also finished well off the lows, but the overhead resistance has been too much for the index.  The 50-day EMA has been able to hold for the last couple of weeks, but as you can see below, the 50-day EMA has not been a great source of support for the S&P in 2010.  I'm afraid if we see another test or two, the EMA will lose the battle.


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

The trading range has remained between 1175 and 1200, but you can see that the descending resistance line is putting a squeeze on the upside. 

Something tells me we are going to see a big move soon.  My guess would be down, but there is always a case for a bullish outcome as well, although it is running out of steam. 

The indicators that we have been watching have been bearish and now we may be seeing the start of the market leaders - at least the Nasdaq - as we see the start of a possible break in a bear flag formation.

                        
                       Charts provided courtesy of www.decisionpoint.com, analysis by TSP Talk

If the dollar continues to rally, the bearish case for stocks is strengthened as the inverse correlation continues between the two.  It is clear that the trend is now up in the dollar, at least in the short-term, although it is bumping up against the upper end of the new rising trading channel.

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

So, the surprise move would be to the upside, and you never know.  But I feel OK about being on the sidelines while this thing decides which way it wants to break.

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