Stocks rallied again on Tuesday as the Dow gained another 121-points on the day. It was a goldilocks kind of day as the bulls saw all the right things moving higher, while the things the bulls would want to see move lower, did. Small caps and the Transports led the U.S. stocks again, and the beaten down I-fund is bouncing back strongly.
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The strength in stocks could have been a result of shorts getting stopped out - meaning those who were betting against the market waved the white flag and covered their bets by buying back the stocks they has sold short. That could be a sign of a capitulation from the bears, but covering a short position and actually getting long stocks are two different things, and we may have only seen the short-covering at this point, and that's the question. How much buying power is still left out there? It seems there are still many underinvested folks out there that may be looking to buy the dips having missed this rally.
The SPY (S&P 500 / C-Fund) closed for a 3rd day above the June and 2016 high, and that's one step toward a confirmation of the breakout. The S&P is more than 7% in the last 10 days so there's always a chance of a pullback to test the breakout level, but the action has certainly been quite bullish. Depending on cash levels and how patient underinvested folks may be, should determine how this rally is fed.
The DWCPF (S-fund) made a new high so the possible double top we talked about yesterday turned out to be a non-event like the one in May, although that breakout failed in June.
The Transportation Index was key yesterday as this market leader has been lagging badly. First we saw it break above the 50-day EMA on Friday. Yesterday it broke above both the important 200-day EMA and the top of the resistance line on the large descending trading channel. The airlines stocks had a nice run and they were the stocks dragging this index down lately.
The EFA (I-fund) still has too many open gaps and it makes a mess of the chart, but on Monday it recaptured the 50-day EMA, and yesterday it captured the 200-day EMA. Between this, the Transports, and the new high on the small caps, we may have something, but again we like to see a 3 to 5 day confirmation of breakouts.
The price of oil was up sharply on the day, a possible good sign for the economy as the chart found support at the 200-day EMA. Today's action will be important as it is now testing the resistance of the 50-day EMA.
The AGG (Bonds / F-fund) pulled back for a second day and two small open gaps were filled (blue). As mentioned yesterday, the 112.50 area was the first level of support and it is being tested now.
Administrative Note: The TSP Talk British Open Golf Tournament Contest is starting this week. Go here for more information!
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. We'll see you back here tomorrow.
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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Yesterday's action was played out as if the bulls were given the opportunity to write the script. They would want to see stocks move higher - check. Bonds pull back - check. Oil move up - check. Gold move down - check. The dollar stabilize - check. Defensive stocks lag - check. And as mentioned, see the small caps and Transports lead - check.The strength in stocks could have been a result of shorts getting stopped out - meaning those who were betting against the market waved the white flag and covered their bets by buying back the stocks they has sold short. That could be a sign of a capitulation from the bears, but covering a short position and actually getting long stocks are two different things, and we may have only seen the short-covering at this point, and that's the question. How much buying power is still left out there? It seems there are still many underinvested folks out there that may be looking to buy the dips having missed this rally.
The SPY (S&P 500 / C-Fund) closed for a 3rd day above the June and 2016 high, and that's one step toward a confirmation of the breakout. The S&P is more than 7% in the last 10 days so there's always a chance of a pullback to test the breakout level, but the action has certainly been quite bullish. Depending on cash levels and how patient underinvested folks may be, should determine how this rally is fed.
The DWCPF (S-fund) made a new high so the possible double top we talked about yesterday turned out to be a non-event like the one in May, although that breakout failed in June.
The Transportation Index was key yesterday as this market leader has been lagging badly. First we saw it break above the 50-day EMA on Friday. Yesterday it broke above both the important 200-day EMA and the top of the resistance line on the large descending trading channel. The airlines stocks had a nice run and they were the stocks dragging this index down lately.
The EFA (I-fund) still has too many open gaps and it makes a mess of the chart, but on Monday it recaptured the 50-day EMA, and yesterday it captured the 200-day EMA. Between this, the Transports, and the new high on the small caps, we may have something, but again we like to see a 3 to 5 day confirmation of breakouts.
The price of oil was up sharply on the day, a possible good sign for the economy as the chart found support at the 200-day EMA. Today's action will be important as it is now testing the resistance of the 50-day EMA.
The AGG (Bonds / F-fund) pulled back for a second day and two small open gaps were filled (blue). As mentioned yesterday, the 112.50 area was the first level of support and it is being tested now.
Administrative Note: The TSP Talk British Open Golf Tournament Contest is starting this week. Go here for more information!
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. We'll see you back here tomorrow.
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.
