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Back to the bottom
Stocks were hit hard yesterday, some more than others, as the Dow lost just
12-points (-0.1%), but the other indices fell between 1.0% and over 2.0% on the
day.
For the
TSP, the C-fund was down 1.0% on Wednesday, the S-fund
fell 2.11%, the I-fund actually added 0.04% as the dollar broke down, and the F-fund (bonds)
added 0.14%.
The S&P 500 lost 1% on the
day and made its way down the the lower end of its tight ascending trading
channel. Are we going to see the end of this 7-week trend or are
stocks going to turn around today and head right back up?
Chart provided courtesy of
www.decisionpoint.com, analysis by TSP
Talk
The S&P index is now 116-points above its 200-day EMA, still a very large
spread, but off of the 130+ spread we saw the other day.
It is still trading above the 20-day EMA so technically this pullback is of
little consequence. Should we see the 20-day EMA and the trading range
break, then we have to worry about how far a pullback or correction can go.
Until then...
The market leader Nasdaq Composite lost 1.5% yesterday but is basically in the same
situation as the S&P - trading within the ascending channel and above the
20-day EMA. No problems yet.
Chart provided courtesy of
www.decisionpoint.com, analysis by TSP
Talk
The other market leader took on a little more damage as the 20-day EMA on
the Dow Transportation Index was
broken in yesterday's 1.8% decline, and the narrow trading range broke as
well, while the longer trend is still OK. If this index is
going to lead, this may be a bad omen for the rest of the
market
- at least in short-term. But this index is generally more volatile and we could see it
snap back into the smaller trading range with one good day. Let's give
it a few days before committing one way or the other.
Chart provided courtesy of
www.decisionpoint.com, analysis by TSP
Talk
Another leader, the Russell 2000 small cap index (probably #3 after the
Transports and Nasdaq) also fell sharply to the tune of -2.6% yesterday. It
broke the 20-day EMA and what there was of the rising trend. We could
also see this index bounce right back as well, but look how extended it is over the
200-day EMA. If the Russell lost 11% today, it would still be above the 200-day EMA.
Chart provided courtesy of
www.decisionpoint.com, analysis by TSP
Talk
The dollar closed below the sideways trading range but again it is early and we don't
know if this will be a false breakdown, or the real deal.
Chart provided courtesy of
www.decisionpoint.com, analysis by TSP
Talk
So we see some cracks from some of the leaders as their short-term trends
may have been broken, but we have not seen any major technical damage yet.
The Dow, S&P 500, and Nasdaq are still within their rising
short-term trading channels, but they are the followers so we'll have to see
how they respond.
In bull markets, you buy the dips. This appears to be a dip. The
question is, will the dip buyers show up or does it turn into a pullback (~
5%) or even a correction (10%)?
Thanks for reading! We'll see you tomorrow.
Tom Crowley
Click here to discuss today's Market Commentary
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