Stocks spent most of the day in negative territory on Friday, but a strong close helped most indices end the day with gains, although the small caps lagged and did close with modest losses. The Dow gained 18-points and bonds were down slightly.
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The holiday shortened week saw nice gains which helped May, normally a challenging month for stocks, end with solid gains. All of the TSP funds are in the green in 2014, and we'll see how June wants to treat them.
The SPY (S&P 500 / C-fund) broke out last week but it faces some resistance starting the new month (orange). The resistance is rising and the chart does not look bad at all, but we could see some short-term digestion of the recent gains and the sooner the open gap gets filled, the better. The key will be for the old breakout level and bottom of that gap to hold in the 189-190 area. The chart has the feel of those 2013 slow creeps higher that rewarded the buy and holders and frustrated the bears who were waiting for a pullback. The pullbacks, when they finally came in 2013, seemed to happen when most of the bears gave up waiting.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The weekly chart shows the longer-term trend is moving higher and bottomed after testing the rising support line in April.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The EFA (I-fund) moved above its rising resistance line last week, although not by much. We have seen a few rising wedge patterns, normally bearish, break to the upside recently and that's sort of surprising. I'm almost waiting for the shoe to drop now that the chart may have us leaning to the bullish side, but the longer these breakouts hold, the more positive it becomes.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The weekly chart of the EFA is similar to the S&P 500 - a clean rising trend. It's the small caps that we have been concerned about.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Small caps lagged on Friday but we are seeing some signs of strength here with the Russell 2000 holding above the 50-day EMA for a third day and what looks like a potential bull flag. There's very little room for error here however, and the 1130 area needs to hold.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Unlike the S&P 500 (C-fund) and EAFE (I-fund) the small caps did break their longer-term rising support line on the weekly chart, but the bulls are hoping that the 50-week EMA and the double bottom will provide support and keep the bull market in small caps alive.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Bonds were slightly lower on Friday as these two ETFs attempt to fill their open gaps. Both charts remain in an uptrend and are just backing off after hitting some resistance. Bonds still look positive but some short-term backing and filling may occur in the short-term.
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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