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| Today's Commentary (Short Term Outlook) |
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Today may be the day After some wild swings over the last couple of weeks, stocks were flat to just slightly down on Wednesday as the Dow dropped 20-points. The C-fund was down 0.2%, the S-fund was flat, the I-fund lost 0.49%, and the F-fund shed 0.24%. The S&P 500 could easily go either way on us so here are a few observations: I love the fact that the 200-day EMA was tested and held. This is a great spot for a reversal and so far, so good. The recent rally off of that low has now run into some resistance, but that always happens off of a bottom. But prior bottoms in 2009 generated larger spikes off of the lows, and they seem to get several days of follow-through action, but this one looks more like a bear flag, so there is that shred of doubt about this low holding. I think it is possible that we could see something like we saw last February (marked "A" in red below) where the bear flag gives us another push down before bottoming.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk The Dow Transportation charts looks a little better in that the bear flag is less pronounced, and we have seen similar downtrends quickly turn into bottoms once the downtrend is broken. But like the S&P 500, there is still a question of a breakout to the upside, or another show of force by the overhead resistance.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk The chart of the other market leader, the Nasdaq, has all kinds of things going on and like the charts above, could easily go either way. I am seeing what could be a head and shoulders pattern (H&S) that may have broken down already. We may have also witnessed the test of the neckline already with this week's rally, but many times H&S patterns test the middle of the head before breaking down again.  Charts provided courtesy of www.decisionpoint.com, analysis by TSP Talk So, this is an assumption that this is a legitimate H&S pattern (and because of the smaller shoulders (LS & RS), it may not be) but if it is, we could see it move south right here at the neckline, or it could move up to test the middle of the head near 2250. The NYSE overbought/oversold indicator is off the oversold levels from last week, but is still slightly oversold. The sentiment surveys are being taken today, so those results will be interesting. I suspect today's action will greatly influence the outcome in the surveys, as if we see a break of the downtrend, the bulls will perk up, and if resistance sends the indices back down, we'll see the bears step up again. I realize this is not much help since we are seeing many indications that these charts could break either way. The futures are actually looking good overnight, but anything can happen between Wednesday night and Thursday morning. Good luck, whatever you decide to do. Thanks for reading. I will be on the road this afternoon and out of town over the holiday weekend, including Friday. I plan to update the site when I can, but my schedule may be off a little. We'll see you back here tomorrow. Tom Crowley |