coolhand's Account Talk

[coolhand]

The S&P got back above that longer-term support line to start the new week. Horizontal support at the March low held. A test of the rising 50 dma is likely next.



The DWCPF was in better shape than the S&P 500 as it never tested its March low, but both charts have been putting in low highs over the past 6 weeks or so. But now the DWCPF appears to have put in a higher low as it erased all of Thursday's losses and a bit of Wednesday's. There's plenty of resistance above with that falling trend line and the 50 dma to contend with, so price will have to clear that as well as hit a higher high. If it can to that, traders may shift to a more bullish stance. NAAIM shifted bullish late last week and I said I don't like to fade them. Monday's rally supports my observation.



The Bank Index bounced with authority on Monday, sending price higher and closing above that horizontal area of resistance. RSI was kissing that oversold line, but has now turned back up.

I'm all in again, though I was hoping to buy at a lower level, but I was already 50% stocks (C and S) before I made the move. I think this bounce should have legs for the next few days or so. TRIN did close at a low level today, so there is a chance we give some gains back on Tuesday, but on balance I think we bias higher. The options market has not settled yet, so I don't know how they are positioned for Tuesday. I'll check again later this evening.

 

[coolhand]

The options shows the smart money leaning a bit bullish, while the dumb money is neutral.

 

[coolhand]

Yesterday, I mentioned that I had a low TRIN reading, which led me to believe that some of Monday's gains might be given back on Tuesday. We did give back some on the S&P 500 and EFA, while the DWCPF was mostly flat.



Not much has changed with Tuesday's action. The S&P 500 shows price still fighting to get back above the 50 dma. After Monday's rally, it's not unexpected to see somewhat of a pullback, so maybe price makes another run at a test of the 50 dma on Wednesday.

However, looking at the indicators a lot of stuff looks neutral to my eye for Wednesday, including the options market. It's possible this market is not ready for a sustained move to the upside with indicators like this. More chop is likely in store for now.

 

[coolhand]

Wednesday's session started out on the positive side, but that optimism peaked just before noon and the major averages then chopped their way lower through the rest of the trading session. Energy and utilities were the biggest losers as the market closed mixed on the day.



The DWCPF temporarily broke both its declining line of resistance and the 50 dma, but could not close above either of those two key levels. It was still a gain, however, which was more than the S&P 500 could muster (or the EFA for that matter).



The S&P 500 came close to testing its 50 dma Wednesday, but fell just short as early gains eventually gave way to a somewhat modest closing loss. Volume has been been higher the past two down days than the volume recorded on Monday's rally. That's not bullish, but the small caps are outperforming for the time being and that's bullish at face value, so I'll take the S&P 500's weakness with a grain of salt for now.



Banks remain in trouble as the Bank Index continues to fight to stay above key support in the 88 to 89 area.

The options smart money is leaning a bit bearish for Thursday, while the dumb money is neutral. NAAIM reports in the morning.

It's been quite difficult to lock in gains for several weeks now as this market see-saw's back and forth. Breadth is still positive, but flat the past couple of trading days as is liquidity. I was looking for chop on Wednesday and I'd say we got it, though over a pretty good trading range. Thursday looks neutral to modesty bearish to my eye. Still holding 30% C and 70% S.

 

[FAAM]

Thanks much for your postings on your Forum; I too am so glad to see you back here frequently as I'm sorry I wasn't signed up for your Primo - I only opted for one that was cheaper.

 

[coolhand]

As you know, I was neutral to modestly bearish for Thursday as saw no technical set-up for any sizeable moves. However, the latest reports from Washington indicate that the Freedom Caucus, (they blocked the GOP's first attempt at health care reform) is now on the same page with Republican leadership in repealing and replacing the Affordable Care Act. That's not insignificant news. If they can lock down health care reform, then that will significantly increase the odds for progress on tax reform. Also, Treasury Secretary Steven Mnuchin said that the White House will release a major tax reform plan "very soon." That is at odds with previous statements, which indicated a longer-term timeline, but politics is very fluid.

In any event, while I was not looking higher for Thursday I am certainly not going to complain about the gains since I am 100% stocks in TSP right now. I expected more upside, but at least some of it has come sooner than expected.



Price on the S&P 500 pushed past its 50 dma intra-day, but was not able to close above it. It did manage to close right at that key level, however. We has to look at the DWCPF to get a better idea of whether resistance on the S&P 500 will hold or not.



Price on the DWCPF shot well above both its 50 dma and declining resistance and closed well above those levels as well. Horizontal resistance is currently being tested, but I feel pretty confident that this rally is not over. Volume was higher overall and that helps support that expectation.



The Bank Index also made a big move to the upside, though it has much more work to do to recapture a bullish tone.

On the sentiment front, NAAIM backed off their bullishness, but not overly so. They are still bullish overall.

It's too early to get a read on the Options, but today's action suggests that there are more gains coming, but how much more I do not know. I think the domestic political news will generate more mileage yet.

 

[JamesE]

Thanks CH, you are a nightly read for me! I appreciate you sharing my friend! 🖒

 

[coolhand]

Futures are much higher this Sunday evening on the French voting results. If the market opens up big tomorrow and it appears it will hold beyond the first hour of trade, I'll be reducing my stock exposure in the C and S funds.

 

[Robo5555]

What do you think of a move to 100% I fund today?

 

[coolhand]

What do you think of a move to 100% I fund today?

The I fund has been performing very well, so exposure to the I fund is fine.

I have decided not to make any moves today. The rally isn't quite as robust as I'd hope, though I'm not complaining. I just think there's more rally left over the days ahead.

 

[Robo5555]

Thanks for your quick response coolhand. We might also have a nuclear test in NK tomorrow....

 

[nasa1974]

What do you think of a move to 100% I fund today?

Obviously it is your decision to make a move into the "I" fund today. But with the fund up over 2% for right now, it's not a move I would make. Hopefully a few more might have opinions.

 

[clester]

Obviously it is your decision to make a move into the "I" fund today. But with the fund up over 2% for right now, it's not a move I would make. Hopefully a few more might have opinions.

I'm actually thinking of reducing my I fund exposure. It's overbought via the RSI being over 70. If it closes there I might sell some of my 100%



Sent from my iPhone using TSP Talk Forums

 

[Cactus]

I'm thinking that with today's big gain, tomorrow is going to give some of that back. Can you say Turn-Around-Tuesday.

The real question is what happens after that for the rest of the week.

 

[coolhand]

Once again, political events are driving market prices and action as Monday closes out with big gains, but perhaps more importantly, with decisive breaks of resistance.



Every TSP stock chart has a big gap on it today. There was more volume to the move, which is bullish. Momentum turned up big too. I am not so sure we're going to see a pullback of any import right away, though some weakness could certainly manifest in the very short term.



Similar story on the DWCPF.



The chart of the EFA is darn bullish. That gap was huge, which doesn't make me inclined to want to buy it, but look at the chart! Volume...up. Strength and momentum...up. The 50 dma has not been broken in months. Yes, RSI is now overbought, but overbought can get a lot more overbought.

Banks rallied, which is bullish, though the BKX is still not out of the woods. More importantly, breadth and liquidity remain solidly in the bull's favor.

I was tempted to pull something off the table today, but then I thought better of it as some indicators are just now starting to flip bullish. I also wasn't so sure early gains would stick, so I stayed the course. I am not concerned with short-term weakness. Many missed today's move because the market was struggling for some time. Now, many will be disinclined to buy this market because they won't believe their eyes (it's that "deer-in-headlight" thing). Sentiment got less bullish last week, but I said that although the surveys are largely neutral, they are still supportive. NAAIM is still largely bullish. The dollar is testing its 200 dma, which is bullish for exports.

So what's the next bogeyman to scare folks out of the market? The debt ceiling? WWIII? It's just one thing after another, isn't it?

 

[ravensfan]

So what's the next bogeyman to scare folks out of the market? The debt ceiling? WWIII? It's just one thing after another, isn't it?

Just like over in Italy; Every time you turn around a day goes by...:nuts:

Anyway, thanks for the great analysis. It is appreciated more than you know.

 

[coolhand]

Generally speaking, when a market takes off the way this one did yesterday and then tacks on another gap up rally the next day, it's bullish and should not be fought.

I think that applies right now. If you're long, I think you may want to exercise some patience, and that's not easy if you have bagged big gains of late. The market is telling us something. And if you're a bear, be real careful right now. Long is the way to be for the time being.



Those gaps may eventually get filled, but it can sometimes be weeks and months before they do. This market does not appear to be inclined to take much profit right now. Momentum is still rising.



The bears will point to a potential double top on the DWCPF, but the S&P 500 has not hit one and it likely will before there is any chance of a pullback, but even then this market may be gunning for much higher highs, so we need to be open to that.



Another fresh high on the EFA. Volume remains elevated and RSI is move overbought.



Interesting that the BKX tested its last peak and fell back. The 50 dma has still not been tested. Momentum is still rising.

My indicators have not changed. Cumulative breadth is ramping higher as is liquidity. That combination typically means a rally has legs.I'm wondering how the market will react when a Government shutdown is averted, which they are alluding will happen. Or some other piece of news that's used to justify higher prices. That's where I think this is going.

The options market has been neutral of late. Not sure what it will read this evening yet as the charts are not settled.

 

[coolhand]

The main bit of news that seems to have caught the market's attention is Trump's tax plan, which when unveiled this afternoon, caused some degree of profit taking into the close. It wasn't a big up-day for much of the market early on, though the DWCPF saw some nice gains intraday, but by the close it only held onto a portion of them.



The S&P tried to stretch to its peak high from almost 2 months ago on Wednesday, but came up just short and closed for a modest loss. Double top in play?



The DWCPF hit a fresh high, but as you can see from today's candlestick, it gave back a good portion of its intra-day gains. Momentum is still on the upswing, but strength tapered off.



The EFA saw a small loss on the day as volume fell off.



The Bank Index tested its 50 dma on Wednesday, but could not push past it. Still, it closed for a small gain.

My outlook has not changed (it's still bullish). The market may be poised for some "give-back", but breadth and liquidity are too bullish to ignore. The options were neutral last night, as they have been for a few days now. Of note, TRINQ closed at a somewhat high level. That's bullish for the NAZ on Thursday from a contrarian standpoint.

NAAIM reports Thursday morning.

 

[coolhand]

The options smart money is leaning bearish for Thursday, so the bears do have some support to look lower, but I am not inclined to look for a ton of selling pressure in spite of recent gaps. Liquidity is too strong to get overly bearish.

 

[coolhand]

As I said yesterday, in spite of the options smart money leaning bearish, liquidity is too elevated to get particularly bearish. The best the market could do for the bears was close largely flat. I'm not surprised.

We could still see some selling and we will eventually, but the trend is up and the current move higher could continue to surprise many. I'm not saying it will, but I think there's a good chance the bulls remain in charge for a bit yet.

No charts this evening. There wasn't enough change to bother.

Futures are probably going to rise this evening. Google and Amazon beat estimates. That may be a reason to continue punishing the bears. We'll see.