After the big rally on Tuesday, stocks were a little more low keyed on Wednesday trading in a fairly tight range above and below the break-even mark, but eventually closed at the highs of the day. The Dow gained 34-points. Oil was a catalyst again as the action in the stock indices kept pace with oil's movement during the day.
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On Friday morning we get the February jobs report and estimates are looking for a gain of 180,000 jobs, and an unemployment rate of 4.9%. The Jobs Report Contest is now open in the forum. Click here.
The jobs report puts the market in an interesting situation where a poor report reflects badly on the economy, but a strong one gives the Fed fuel to go back to raising rates, which is what they really want to do. The best report for stocks may one that comes in very close to the estimates... No surprises.
As I mentioned yesterday, this isn't the most common outcome from a H&S, but sometimes the head and shoulders pattern will run all the way up to test the middle of the head before it fades again. A test of the head would fill that open gap.
The Dow Completion Index (small caps / S-Fund) continues to cut through the resistance levels that would normally be a tough road, particularly in a bear market. The bear market is either leaving us, or will come back and take out many unsuspecting bulls who have embraced this new uptrend. For now, the bulls have taken charge, but the bears may be lying in wait.
The EFA (EAFE Index / I-fund) also broke above a double dose of resistance yesterday and many of the Asian and European markets are starting to crack above their downtrends.
One of the big catalysts, although not a part of the I-fund, is China's Shanghai Index. It had a big rally on Wednesday after their stimulus announcement sent US. stocks higher on Tuesday. There's more resistance in the way, but if this can ignore it like the U.S. markets seem to be doing, perhaps a double bottom low will hold. To be continued.
The HYG High Yield Fund ran nearly straight up since the February low but it backed off yesterday after testing the 200-day EMA on Tuesday.
The price of oil has remained in the rising wedge formation and clearly something is going to have to give in the coming days. Rising wedges tend to break down, but being above the 50-day EMA is a bullish position. This will be another major indicator for the market in the short-term.
Bonds were down yesterday and yields rose. The bond market seems to be positioning itself for a strong jobs report. Te bear flag in yields may prove to be bullish for bond prices and the F-fund, but could that mean bond traders are selling the rumor (of a strong report) and buying again on the news on Friday? Yields go up when bond prices go 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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On Friday morning we get the February jobs report and estimates are looking for a gain of 180,000 jobs, and an unemployment rate of 4.9%. The Jobs Report Contest is now open in the forum. Click here.
The jobs report puts the market in an interesting situation where a poor report reflects badly on the economy, but a strong one gives the Fed fuel to go back to raising rates, which is what they really want to do. The best report for stocks may one that comes in very close to the estimates... No surprises.
The SPY (S&P 500 / C-Fund) traded below the 200-day EMA and the rising wedge (red) most of the day on Wednesday before the late push higher near the close. The bulls will be looking for the 200-day EMA to be a non-factor while the bears know the 200-day can be a rally killer in a bear market. The large bearish head and shoulders pattern looms, but so does the large open gap above 202.
As I mentioned yesterday, this isn't the most common outcome from a H&S, but sometimes the head and shoulders pattern will run all the way up to test the middle of the head before it fades again. A test of the head would fill that open gap.
The Dow Completion Index (small caps / S-Fund) continues to cut through the resistance levels that would normally be a tough road, particularly in a bear market. The bear market is either leaving us, or will come back and take out many unsuspecting bulls who have embraced this new uptrend. For now, the bulls have taken charge, but the bears may be lying in wait.
The EFA (EAFE Index / I-fund) also broke above a double dose of resistance yesterday and many of the Asian and European markets are starting to crack above their downtrends.
One of the big catalysts, although not a part of the I-fund, is China's Shanghai Index. It had a big rally on Wednesday after their stimulus announcement sent US. stocks higher on Tuesday. There's more resistance in the way, but if this can ignore it like the U.S. markets seem to be doing, perhaps a double bottom low will hold. To be continued.
The HYG High Yield Fund ran nearly straight up since the February low but it backed off yesterday after testing the 200-day EMA on Tuesday.
The price of oil has remained in the rising wedge formation and clearly something is going to have to give in the coming days. Rising wedges tend to break down, but being above the 50-day EMA is a bullish position. This will be another major indicator for the market in the short-term.
Bonds were down yesterday and yields rose. The bond market seems to be positioning itself for a strong jobs report. Te bear flag in yields may prove to be bullish for bond prices and the F-fund, but could that mean bond traders are selling the rumor (of a strong report) and buying again on the news on Friday? Yields go up when bond prices go 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.
