Open gaps and new trends
Stocks opened sharply lower yesterday morning, attempted a late morning
push higher, but could not get the bulls to sustain a rally as the indices
never made it back to even leaving an open gap, and the Dow closed down 134-points.
For the TSP, the
C-fund fell 1.45% on Tuesday. The S-fund lost 1.47%. The
I-fund dropped 1.65%. The F-fund (bonds)
rallied 0.27%.
The S&P 500 opened lower leaving an open gap between 1063 and 1067.
The good news is, it would be unusual if that gap was not filled within a
few days. The bad news is 1067 might turn out to be resistance on the
way up. Market crashes are rare, and snap back rallies are more likely
after days / weeks like we have had, but when crashes do occur, they do tend
to come out of situations such as these.
I think it is safe to draw in the longer-term trading channels as we seem to
be in a longer-term downtrend. If you remember, I drew a similar
channel
earlier this month saying we probably want to be sellers - unless that
line is taken out on the upside, but the S&P couldn't quite get above that
June high.
Chart provided courtesy of
www.decisionpoint.com, analysis by TSP
Talk
The Dow Transportation Index finally broke below the 200-day EMA this week.
When it was hanging above it, we thought there was hope for the S&P 500 to
follow, but now that hope is currently lost.
Chart provided courtesy of
www.decisionpoint.com, analysis by TSP
Talk
The
Nasdaq, which is much more prone to gap openings because of the
electronic trading, now has two open gaps after having three filled in the
last several weeks. That higher open gap may take some time to get
filled, but yesterday's has a good chance of being filled some time this
week. But after that, I don't know. The chart does not look very
good.
Chart provided courtesy of
www.decisionpoint.com, analysis by TSP
Talk
Not
surprisingly, the
recent action has taken the market into oversold territory.
If we were still in a bull market I would say the
-520 reading was extreme, but in a bear market it is not
very extreme reading.
Chart provided courtesy of
www.decisionpoint.com, analysis by TSP
Talk
We could easily see some very short-term buying opportunities ahead, but it
is a dangerous market right now and unless you can be very nimble, capital
preservation may be your best option.
Thanks for reading! We'll see you back here tomorrow.
Tom Crowley
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