Stocks rallied out of the gate on Monday morning and held onto the gains all day. The Dow gained 112-points while the laggards were leaders with the Nasdaq and Russell 2000 gaining 1.8% and 2.4% respectively.
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Volume wasn't all that impressive but there are investors and money managers out there who may find themselves under-invested, and if the rally continues, they'll have to put some money to work.
The SPY (S&P 500 / C-fund) broke out yesterday and closed at an all-time high. It is potentially an inverted head and shoulders breakout, and if it holds, the upside target would be in the area of 193 - 196. We already had one fake out back in April, and with volume being light, I will be looking for 3 to 5 closes above the breakout level to confirm the breakout.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Taking a look at some of the lagging indices, the Nasdaq 100 (QQQ) broke out of its descending trend and blasted above the 20 and 50-day EMAs, but now we have have to watch to see if the large head and shoulders pattern is in the process of making a right shoulder, in which case this rally wouldn't last too long.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Russell 2000 also broke above its descending trendline and has now closed back above the 200-day EMA for a second straight day, but it remains below the 50-day EMA so there's more work to be done for it to get out of its bearish mode.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Dow Transportation Index made a new all-time high yesterday, but it is now up against its rising resistance line. This leader looks good but now the bulls would need this inverted head and shoulders pattern to breakout above its rising resistance (neckline.)
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Bonds were down modestly as the AGG bond ETF tests the bottom of a rising wedge after backing off from the upside resistance.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
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Thanks for reading! We'll see you back here tomorrow.
Tom Crowley
Posted daily at TSP Talk Market Commentary
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