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Today's Commentary (Short Term Outlook)
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Make or break The volatility and wide swings continue on Wall Street as the Dow had yet another triple digit day, this time being up 150-points. Is this the rally to sell, or is there more to come? For the TSP, the stock funds were up 1.3% to 1.9% with the I-fund leading the way, with the help of a fall in the dollar. The F-fund dropped 0.18%. This current situation is one of the toughest I've seen in a while. This market is either poised to crack, or we are at a short-term bottom - and it could easily go either way. If you ask 100 experts, your responses may be the same as if you tossed a coin 100 times. Let's look at the evidence: The S&P 500 had a big reversal day last Friday, and the bottom came right at the 200-day EMA. Since then the S&P has rallied from the low of 1044 on Friday, to yesterday's high of 1079+. There is now some overhead resistance that will have to be taken out very quickly, or the developing bear flag pattern could generate a break to the downside, as bear flags tend to do. There will also be resistance from the 20 and 50-day EMA's (not shown) which are in the 1090-1100 area.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk The leader, Dow Transports, are trading back above the 200-day EMA, but the index's high yesterday hit the overhead resistance before backing off. There is descending resistance, as well as rising overhead resistance near 4000, where the 20 and 50-day EMA's are also heading.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk The small caps and the semiconductor index have the same ...   Charts provided courtesy of www.decisionpoint.com, analysis by TSP Talk The housing index also found support at the 200-day EMA, but rather than having a descending trading channel, it appears to have formed a bearish head and shoulders pattern. If the neckline breaks below 98-99 level, this one could drop like a rock. So, it's the same situation. It either bounces off of the 200-day EMA for another leg higher, or support breaks and another bear market cycle begins.  Charts provided courtesy of www.decisionpoint.com, analysis by TSP Talk I have my doubts about the market, but nerves do generally get frayed right before a big rally. I may take the safe route by getting out, with the intent of using my second transfer to buy back in if this thing heads north instead of south. The only thing that could change my mind is if the S&P 500 can manage to get above that resistance today (over ~ 1080) on high volume, hold until the 12 noon ET trading deadline - but even if that happens, the descending 20 and 50-day EMA's are in the 1090-1100 area and that could be more resistance to deal with. Thanks for reading. We'll see you back here tomorrow. Tom Crowley |