The stock market followed up on Wednesday's rally with another big run on Thursday. The Dow gained 323-points and the gains were broad across most indices. It looks a lot like the typical "V" bottom market lows that we have seen over and over in the last few years, so is that what we should expect?
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The oversold I-fund played along with the U.S. rally gaining 1.46%, while bonds and the F-fund pulled back.
We get the December jobs report this morning (Friday) and estimates are looking for a gain of about 245,000 jobs and an unemployment rate of 5.7%.
The SPY (S&P 500 / C-fund) opened a new gap as stocks soared for a second straight day. It may not get filled today - unless maybe be the jobs report is abysmal, but we know they tend to get filled sooner than later.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
Speaking of jobs reports, I marked the prior six jobs report on the chart to show that, while do get some upside on the day the reports are released, we often saw selling in the days following. Only the November report saw the market continue to move higher without pulling back some first.
The weekly chart of the SPY shows a positive reversal bar being created, and only a severe down day today could change that. Prior reversal bars have led to further movement in the direction of the reversal.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Wilshire 4500 (S-fund) is close to testing that resistance line that failed in late 2014. It's do or do time.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Russell 2000 is in the same situation but this shows the open gap like the SPY. This looks like a possible cup and handle formation, which tend to break to the upside, but we'll wait for the breakout before declaring victory for the small caps.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The EFA (EAFE Index / I-fund) created a small open gap (red) with Thursday's rally, and it nearly filled the open gap (green) created this past Monday morning when stocks sold off. It still looks bearish but we're seeing an oversold rally.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The AGG (Bonds / F-fund) created a cup and handle formation, which was a bullish, and it did breakout to the upside. It found resistance at the double top. What cup and handle formations tend to do is come back to test the breakout area before resuming upward. If we see a test of the double support lines, and it holds, it could be a bullish sign for bonds and the F-fund.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The yield on the 10-year Treasury, which moves counter to bond prices (F-fund and AGG) has rebounded to nearly fill the open gap from Monday. The top side of that gap could act as resistance for the yield. If yields hit that and move back down, it would be bullish for the F-fund, and possibly bearish for stocks.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
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Thanks for reading! Have a great weekend!
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.
