Stocks were flat on the Thursday before the long market holiday weekend but closed well off the lows potentially creating a positive reversal day, but pre-holiday trading can be very unpredictable so I won't call it a reversal officially. The Dow gained 13-points while the S&P 500 closed just slightly in the red.
[TABLE="width: 89%, align: center"]
[TR]
[TD="width: 180, align: center"]
[/TD]
[TD="width: 49, align: center"][/TD]
[TD="align: center"] Daily TSP Funds Return
[TABLE="width: 69%, align: center"]
[TR]
[TD="align: right"] [/TD]
[/TR]
[/TABLE]
[/TD]
[/TR]
[/TABLE]
Despite the market holiday we did get the 4th quarter GDP number on Friday and it came in at +1.4%, which was higher than the expected +1.0%. With markets around the world being closed, we didn't get a chance to see the reaction. Normally a stronger than expected GDP would be bullish for stocks, but in an environment that is more concerned with keeping interest rates low, the stronger then expected economic data could actually be a problem for stocks since it gives the Fed a reason to raise rates. The Sunday evening futures have just opened as I write this and it is slightly positive with the S&P futures up 3-points.
This is what a head and shoulders pattern head test looks like, something I learned from futures trader Oscar Carboni many years ago. And looking at the chart above, it couldn't be more textbook right now.
The DWCPF (Dow Completion Index / Small Caps) is still struggling to get above the 200-day EMA but the 20-day EMA held during the early pullback on Thursday. It is not unusual to see the 20 or 50-day averages hold on the first test. It is whether they hold in the following days that tells the story.
The Dow Transportation Index has led the market higher off its January lows and the chart looks pretty good so far, which is a bullish sign for stocks. We'll want to see the 200-day EMA hold on any pullback or the chart risks being a failed break out.
The price of oil did break down last week from its narrow rising trading channel after failing at the 200-day EMA the prior week. As we have talked about ad nauseum, what happens to oil could be the tell for the stock market so we'll just keep watching.
The EFA (EAFE Index / I-fund) broke below its trading channel on Thursday, opening a small gap, but found strong support at the 50-day EMA. As I mentioned above, these major moving averages do tend to hold on the first test, but it's the days following that count.
The HYG High Yield Bond Fund broke down from a rising wedge and on Thursday of last week temporarily moved back below the 200-day EMA. The action has been pretty bullish chart over all and that is a good sign for stocks, but if it falls back below the 200-day EMA some of that bullishness may dissipate. A pullback to the 50-day EMA would seem healthy enough but that would probably means stocks would pullback as well.
The AGG (Bonds / F-fund) tested the recent highs but failed to breakout again on Thursday. The top of the pennant formation has held as support as we might expect, and if bonds continue to knock on the resistance door near 110.25, someone is going to let it in and we could see a breakout this week.
Read more in today's TSP Talk Plus Report. We post more charts, indicators and analysis, plus discuss the allocations of the TSP and ETF Systems. For more information on how to gain access and a list of the benefits of being a subscriber, please go to: www.tsptalk.com/plus.php
Thanks for reading. We'll see you back here tomorrow.
Tom Crowley
Posted daily at TSP Talk - Market Commentary
The legal stuff: This information is for educational purposes only! This is not advice or a recommendation. We do not give investment advice. Do not act on this data. Do not buy, sell or trade the funds mentioned herein based on this information. We may trade these funds differently than discussed above. We use additional methods and strategies to determine fund positions.
[TABLE="width: 89%, align: center"]
[TR]
[TD="width: 180, align: center"]
[TD="width: 49, align: center"][/TD]
[TD="align: center"] Daily TSP Funds Return
[TR]
[TD="align: right"] [/TD]
[/TR]
[/TABLE]
[/TD]
[/TR]
[/TABLE]
Despite the market holiday we did get the 4th quarter GDP number on Friday and it came in at +1.4%, which was higher than the expected +1.0%. With markets around the world being closed, we didn't get a chance to see the reaction. Normally a stronger than expected GDP would be bullish for stocks, but in an environment that is more concerned with keeping interest rates low, the stronger then expected economic data could actually be a problem for stocks since it gives the Fed a reason to raise rates. The Sunday evening futures have just opened as I write this and it is slightly positive with the S&P futures up 3-points.
The S&P 500 / C-Fund provided some interesting pre-holiday action after testing, and so far failing, at the descending resistance line and the middle of the head of the head and shoulders pattern. That resistance could be the final line in the sand for the bears because if they cannot hold the S&P 500 down at that point, the bulls will take full control of this market. I know it feels as if they have already, but we haven't seen new highs yet - just a lower high so far. The mini-reversal day on Thursday actually looks bullish for stock in the short-term, but I don't think it was significant during a light volume pre-holiday trading day.
This is what a head and shoulders pattern head test looks like, something I learned from futures trader Oscar Carboni many years ago. And looking at the chart above, it couldn't be more textbook right now.
The DWCPF (Dow Completion Index / Small Caps) is still struggling to get above the 200-day EMA but the 20-day EMA held during the early pullback on Thursday. It is not unusual to see the 20 or 50-day averages hold on the first test. It is whether they hold in the following days that tells the story.
The Dow Transportation Index has led the market higher off its January lows and the chart looks pretty good so far, which is a bullish sign for stocks. We'll want to see the 200-day EMA hold on any pullback or the chart risks being a failed break out.
The price of oil did break down last week from its narrow rising trading channel after failing at the 200-day EMA the prior week. As we have talked about ad nauseum, what happens to oil could be the tell for the stock market so we'll just keep watching.
The EFA (EAFE Index / I-fund) broke below its trading channel on Thursday, opening a small gap, but found strong support at the 50-day EMA. As I mentioned above, these major moving averages do tend to hold on the first test, but it's the days following that count.
The HYG High Yield Bond Fund broke down from a rising wedge and on Thursday of last week temporarily moved back below the 200-day EMA. The action has been pretty bullish chart over all and that is a good sign for stocks, but if it falls back below the 200-day EMA some of that bullishness may dissipate. A pullback to the 50-day EMA would seem healthy enough but that would probably means stocks would pullback as well.
The AGG (Bonds / F-fund) tested the recent highs but failed to breakout again on Thursday. The top of the pennant formation has held as support as we might expect, and if bonds continue to knock on the resistance door near 110.25, someone is going to let it in and we could see a breakout this week.
Read more in today's TSP Talk Plus Report. We post more charts, indicators and analysis, plus discuss the allocations of the TSP and ETF Systems. For more information on how to gain access and a list of the benefits of being a subscriber, please go to: www.tsptalk.com/plus.php
Thanks for reading. We'll see you back here tomorrow.
Tom Crowley
Posted daily at TSP Talk - Market Commentary
The legal stuff: This information is for educational purposes only! This is not advice or a recommendation. We do not give investment advice. Do not act on this data. Do not buy, sell or trade the funds mentioned herein based on this information. We may trade these funds differently than discussed above. We use additional methods and strategies to determine fund positions.
