Stocks chopped around in early trading Thursday, alternating between small losses and gains but by the afternoon they were on their way. The Dow gained 212-points after yet another oil news related headline hit the wire so investors had their catalyst, and they went with it.
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The price of oil jumped sharply after more talks of controlling oil production.
The question is, how long is the price of oil going to control the direction of the stock market? Stocks do like to latch onto something as a catalyst, but this one has gone on quite a while now. If you remember what the catalyst was prior to oil's problems, it was China's stock market, and did you see what happened to the Shanghai Index on Thursday?
A 6.4% decline nearly sent it down to new lows. Perhaps if investors can get oil out of their minds this may begin to matter again.
Another old catalyst which is being ignored now is the rise in the price of gold this year. Gold is up about 20% so far this year so with also bonds rising, we have another safe haven doing very well. Why is that?
The action in the SPY (S&P 500 Index / C-Fund) has been rather bullish lately but it is still flirting with the overhead resistance. It feels like it wants to go higher, but we've seen this kind of action before, and while we are still in a bear market (per the indicators, not the 20% definition) breakouts can and do fail.
I am not comparing the current market to the financial crisis of 2008, but I wanted to show how breakouts in bear markets can fail after a few days. It's a way to lure in more bulls before the bear sinks its teeth into the indices again.
This chart shows some possible good signs in that the lower end of that long-term trading channel is being recaptured, although it has danced above and below it for the last 4 days. Also, the 50-day SMA has been recaptured for the first time all year.
The green arrows and circles above show breakouts and breakdowns that led to a major moves from bull to bear or bear to bull. The red arrows and circles were failed breakouts / breakdowns that reversed after having investors leaning the wrong way for a few days. Which of these the current action is planning, I don't know. Perhaps oil will be the key, but China and the global economic growth issues could eventually trump oil.
The Dow Completion Index (small caps / S-Fund) is looking to make a multi-week high but it is still below some key resistance in the 50-day EMA, the Feb 1st high, and the old rising support line off the January low. I'm wondering if that is a possible inverted head and shoulders forming? That's for another day and we'll keep an eye on it. H&S and inverted H&S patterns are a little tricky.
China looks like it may become a negative factor again, but I was looking at a long-term weekly chart of the German DAX. There is a long-term support line (blue dashed) going back to 2012 that was broken and could be a concern, but if we go back to the 2009 lows there is a major support line that was tested and held this month.
The HYG High Yield Bond Fund may be another bright spot as it broke above its resistance line and is poking above the 50-day EMA. It too could be a fake-out, but it is something the bulls will be watching. The four month downtrend may be trying to end.
Bonds were up and yields continue to fall. This isn't what we might expect during a bull market with a strong economy so I again I think stocks are just on the crude oil train and are shutting out other possible warning signs.
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. Have a great weekend!
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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The price of oil jumped sharply after more talks of controlling oil production.
Oil has been having a hard time getting above the 50-day EMA but it has been able to hold above the old trading channel's resistance line.
The question is, how long is the price of oil going to control the direction of the stock market? Stocks do like to latch onto something as a catalyst, but this one has gone on quite a while now. If you remember what the catalyst was prior to oil's problems, it was China's stock market, and did you see what happened to the Shanghai Index on Thursday?
A 6.4% decline nearly sent it down to new lows. Perhaps if investors can get oil out of their minds this may begin to matter again.
Another old catalyst which is being ignored now is the rise in the price of gold this year. Gold is up about 20% so far this year so with also bonds rising, we have another safe haven doing very well. Why is that?
The action in the SPY (S&P 500 Index / C-Fund) has been rather bullish lately but it is still flirting with the overhead resistance. It feels like it wants to go higher, but we've seen this kind of action before, and while we are still in a bear market (per the indicators, not the 20% definition) breakouts can and do fail.
I am not comparing the current market to the financial crisis of 2008, but I wanted to show how breakouts in bear markets can fail after a few days. It's a way to lure in more bulls before the bear sinks its teeth into the indices again.
This chart shows some possible good signs in that the lower end of that long-term trading channel is being recaptured, although it has danced above and below it for the last 4 days. Also, the 50-day SMA has been recaptured for the first time all year.
The green arrows and circles above show breakouts and breakdowns that led to a major moves from bull to bear or bear to bull. The red arrows and circles were failed breakouts / breakdowns that reversed after having investors leaning the wrong way for a few days. Which of these the current action is planning, I don't know. Perhaps oil will be the key, but China and the global economic growth issues could eventually trump oil.
The Dow Completion Index (small caps / S-Fund) is looking to make a multi-week high but it is still below some key resistance in the 50-day EMA, the Feb 1st high, and the old rising support line off the January low. I'm wondering if that is a possible inverted head and shoulders forming? That's for another day and we'll keep an eye on it. H&S and inverted H&S patterns are a little tricky.
China looks like it may become a negative factor again, but I was looking at a long-term weekly chart of the German DAX. There is a long-term support line (blue dashed) going back to 2012 that was broken and could be a concern, but if we go back to the 2009 lows there is a major support line that was tested and held this month.
The HYG High Yield Bond Fund may be another bright spot as it broke above its resistance line and is poking above the 50-day EMA. It too could be a fake-out, but it is something the bulls will be watching. The four month downtrend may be trying to end.
Bonds were up and yields continue to fall. This isn't what we might expect during a bull market with a strong economy so I again I think stocks are just on the crude oil train and are shutting out other possible warning signs.
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. Have a great weekend!
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.
