​ Stocks opened sharply lower yesterday but they quickly bottomed and we saw a Yellen generated rally. The Dow ended the day up 71-points, and the wealth was spread around to most major indices as well as the bond market.
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[TD="width: 80, align: right"] +0.0063%[/TD]
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[TD="width: 80, align: right"] +0.22%[/TD]
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[TD="width: 80, align: right"] +0.84%[/TD]
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[TD="width: 80, align: right"] +1.11%[/TD]
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[TD="width: 80, align: right"] +0.12%[/TD]
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The nominee to be the next Federal Reserve Chairman, Janet Yellen, said yesterday, "I believe that supporting the recovery today is the surest path to returning to a more normal approach to monetary policy." That was music to investor's ears and it turned a negative day into a very positive day.
In Tuesday's commentary I said, "I wouldn't be surprised to see a new high [in the S&P 500] that quickly gets sold, just to get investors leaning the wrong way." We may be seeing the first half of that prediction now, but the important part of that prediction is obviously the sell-off half. That would certainly go against the grain of nearly every breakout this year which has led to record highs time and again, so we'll see. Most indicators are on my prediction's side, however.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Nasdaq stalled just shy of a new 52-week high but if this attempt at a new high is like the last, week might see a big breakout, but again, the indicators suggest it could be different this time.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The small caps broke above their recent descending resistance line and is making a beeline toward the recent highs. Yesterday I said, "it looks like there could be a big move coming one way or the other [on this IWM chart]. Either a breakout above resistance, or a drop back to the 50-day EMA." I really thought it would be down, but instead it went up, but that upside move does go along with my prediction of another new high for the S&P 500 before a sell-off.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Transportation Index is in the same boat as the Nasdaq - on the brink of a breakout, but not quite there.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The dollar slipped some yesterday after the Yellen comments since what she wants to do is print more money and keep fueling the market. Meanwhile, the dollar ETF (UUP) has done a good job of trying to fill its open gaps.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Bonds moved higher but the charts still look to be in bad shape. They have been due for at least a short-term rebound, particularly with those open gaps overhead. The intermediate-term support lines have been broken and both the 20+ year and the 7 to 10 year ETFs are trading below their 50-day EMAs.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
We are seeing many indicators / ratios getting out of whack lately and it just seems like something is going to give. Either that or the Fed's manipulation of monetary policy is going to continue to expand the bubbles they have already created. I know they are a lot smarter than I am, but throughout history there have been bubbles, and they always eventually pop. When that will happen is only a matter of time, but no one knows for sure.
In today's TSP Talk Plus report we go over some short-term indicators plus an interesting stocks to bonds ratio chart. 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 TSP Talk Market Commentary
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