Stocks jumped out of the game on Wednesday morning creating a gap up opening follow-through to Tuesday's big rally. Everything was going the bulls' way but in the last 45 minutes or so of trading we saw 2% gains in the Dow and S&P 500 become 1% gains. The Dow ended the day with a solid 241-point gain but as you can see in these charts below, particularly the S&P, the bulls may have a lump in their throats heading into Thursday.
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Open gaps were created on most of the charts yesterday and those are almost always potential targets for any pullbacks, but for most of the day it looked like we could be seeing a gap and go kind of day, as we talked about yesterday. Now the negative reversal pattern may mean the gap will get filled.
This 5-day chart shows that there may be some significance in the 2705 area - if that open gaps does not get filled right away.
Either way it was back to back gains for stocks, something we hadn't seen all month, so perhaps the bulls have something to hang their hats on, and the start of November does have a positive historical bias, but now all eyes may be on next week's important midterm elections. One that could have huge ramifications for the stock market.
I don't know if there's any pattern here, but these are the returns for October and November during election years going back to 2000.
The October jobs report comes out on Friday morning. Estimates are looking for a again of 190,000 jobs, an unemployment rate of 3.7%, and a 0.2% rise in hourly wages.
Apple reports their earnings today. I am assuming it will be after the bell so Friday morning should be interesting with the reaction those earnings and to the jobs report.
The S&P 500 / C-fund rallied had for about 6 and a half hours yesterday, but then faded hard in the last 30 minutes. That created a negative reversal candlestick and it is pointing right at the open gap. The good news is, the death knell resistance line that has been falling all month was broken to the upside, and there's chance that could hold now as support. Falling wedges (blue dashed lines) do tend to break to the upside and the top of the wedge is supposed to be support on any subsequent pullback. Can we trust it?
The DWCPF (S-fund) has a similar pattern where resistance was broken but a negative reversal is staring down at an open gap.
The Dow Transportation Index gave up virtually all of its early gains by the close on Wednesday.
The EAFE Index (I-fund) - same deal. Resistance broke, open gap, tough call for the short-term.
The High Yield Corporate Bond Fund was the most disappointing with it moving back above the 200-day EMA in early trading, only to rollover and close back below it and the descending resistance line. That's 4 closes below the 200-day EMA now.
The yield on the 10-year Treasury moved up quite a bit yesterday keeping that bull flag intact. The opposite is true of the the AGG (bonds / F-fund) where the bear flag is about nearly developed and potentially ready to break down.
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 www.tsptalk.com/comments.php
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.
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Open gaps were created on most of the charts yesterday and those are almost always potential targets for any pullbacks, but for most of the day it looked like we could be seeing a gap and go kind of day, as we talked about yesterday. Now the negative reversal pattern may mean the gap will get filled.
This 5-day chart shows that there may be some significance in the 2705 area - if that open gaps does not get filled right away.
Either way it was back to back gains for stocks, something we hadn't seen all month, so perhaps the bulls have something to hang their hats on, and the start of November does have a positive historical bias, but now all eyes may be on next week's important midterm elections. One that could have huge ramifications for the stock market.
I don't know if there's any pattern here, but these are the returns for October and November during election years going back to 2000.
The October jobs report comes out on Friday morning. Estimates are looking for a again of 190,000 jobs, an unemployment rate of 3.7%, and a 0.2% rise in hourly wages.
Apple reports their earnings today. I am assuming it will be after the bell so Friday morning should be interesting with the reaction those earnings and to the jobs report.
The S&P 500 / C-fund rallied had for about 6 and a half hours yesterday, but then faded hard in the last 30 minutes. That created a negative reversal candlestick and it is pointing right at the open gap. The good news is, the death knell resistance line that has been falling all month was broken to the upside, and there's chance that could hold now as support. Falling wedges (blue dashed lines) do tend to break to the upside and the top of the wedge is supposed to be support on any subsequent pullback. Can we trust it?
The DWCPF (S-fund) has a similar pattern where resistance was broken but a negative reversal is staring down at an open gap.
The Dow Transportation Index gave up virtually all of its early gains by the close on Wednesday.
The EAFE Index (I-fund) - same deal. Resistance broke, open gap, tough call for the short-term.
The High Yield Corporate Bond Fund was the most disappointing with it moving back above the 200-day EMA in early trading, only to rollover and close back below it and the descending resistance line. That's 4 closes below the 200-day EMA now.
The yield on the 10-year Treasury moved up quite a bit yesterday keeping that bull flag intact. The opposite is true of the the AGG (bonds / F-fund) where the bear flag is about nearly developed and potentially ready to break down.
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 www.tsptalk.com/comments.php
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.
