Well, if you like volatility you have come to the right place: The stock market. The Dow gained 263-points on Friday, just another triple digit move. Even on the days when the Dow doesn't close up or down with a triple digit gain or loss, the intraday moves are wide and it just closes somewhere in the middle.
When stocks sell off sharply like they had been, often the snap-back rallies can be very sharp as well. It doesn't necessarily mean the market has bottomed, but there are gains to to made in good and bad markets if you can time it correctly. Of course that's easier said than done.
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The C and I-funds saw solid gains of over 1% on Friday while those pesky small caps posted just a modest gain. They have either been leading or lagging by a large margin lately so pick your funds wisely. Bonds were slightly lower.
The SPY (S&P 500 / C-fund) had a big day on Friday but it could not close near the highs and it may have even created a negative reversal day. Obviously, gaining over 1%, it closed off the lows as well and that created what they call a "doji" candlestick formation, and they tend to indicate indecision and a possible change in trend. But what is the current trend? It certainly isn't up. We've haven't had two positive days in a row in the S&P since October 6th.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The longer-term chart shows us the spike in volume and how this tends to be a market direction changing event. It's not always an instant reversal, but that capitulation-like sell-off on Wednesday does look like at least a short-term low.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Wilshire 4500 (S-fund) led the way last week and the S-fund gained 1.72% on the week while the I-fund was flat and the C-fund lost 1%. The negative reversal day on Friday is certainly a concern heading into the new week. Is that all the S-fund is going to give the bulls... a 4-day rally?
Chart provided courtesy of www.stockcharts.comm, analysis by TSP Talk
The Russell 2000 (small caps) magnifies the negative reversal day so the small caps have some work to do. Perhaps it just needs a little rest after the big week, while investors jump into last week's lagging S&P 500.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The index that led the bull market was the Nasdaq 100 (QQQ) and it was not spared during October's decline, but it is back above the 200-day EMA and it's a good sign to see one of the market leaders in better technical shape.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The EFA (EAFE Index / I-fund) rallied late last week but is is still broken and in need of help. Still, it is due for a relief rally and even though it is actually in a bear market now, bear market rallies can be explosive.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The yield on the 10-year treasury saw a capitulation decline on Wednesday, then a rebound and that was the trigger that saw stocks bottom later that day.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The decline in yields saw the AGG Bond Funds peak and rollover creating a huge negative reversal day. Bonds have been down since and that may very well end up being the long-term top in bonds.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
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Thanks for reading! We'll see you back here tomorrow.
Tom Crowley
Posted daily at A web page that points a browser to a different page after a few seconds
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