Stocks rallied nicely again on Friday as a dip in the dollar sent the prices of most stocks, bonds, and commodities higher. The Dow gained 55-points and we saw about a half of a percent gain almost across the board. The F-fund added 0.12%.
[TABLE="width: 80%, align: center"]
[TR]
[TD="width: 300"]
[TD="align: center"] Daily TSP Funds Return[TABLE="width: 163"]
[TR]
[TD="width: 83, align: right"] G-Fund:[/TD]
[TD="width: 80, align: right"] +0.0056%[/TD]
[/TR]
[TR]
[TD="width: 83, align: right"] F-fund:[/TD]
[TD="width: 80, align: right"] +0.12%[/TD]
[/TR]
[TR]
[TD="width: 83, align: right"] C-fund:[/TD]
[TD="width: 80, align: right"] +0.51%[/TD]
[/TR]
[TR]
[TD="width: 83, align: right"] S-fund:[/TD]
[TD="width: 80, align: right"] +0.46%[/TD]
[/TR]
[TR]
[TD="width: 83, align: right"] I-fund:[/TD]
[TD="width: 80, align: right"] +0.39%[/TD]
[/TR]
[/TABLE]
[TABLE="width: 69%, align: center"]
[TR]
[TD="align: right"] [/TD]
[/TR]
[/TABLE]
[/TD]
[/TR]
[/TABLE]
The S&P 500 (SPY) pushed to new highs by the close on Friday, as it tries to breakout to the upside of a rising wedge pattern - something that is tough to do, or at least tough to hold onto once broken.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
I posted this in the Weekly Wrap Up this weekend but thought it worth repeating. I know I am looking for a little pullback before buying again, but the following charts made the biggest bullish case for continued gains.
While most of the indices have not shown this pattern, the Dow has been consolidating for over 6-months now. The recent breakout above this trading channel looks like it could have taken the Dow into overbought territory after moving almost straight up since the early October low. However, breaks from extended consolidations can produce explosive rallies.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
This chart from 1997 - 1998 shows what happened after the S&P 500 consolidated for 7-months before breaking out in February 1998. Then in the spring of 1998, the S&P consolidated again for over 3-months before shooting higher. The longer the consolidation, the bigger the move out of the breakout.
For better or for worse, being the market timer that I am, I also point out that the large breakout gains from both of those consolidation periods, disappeared quickly over a very weak 6-week period. This is why you can't get complacent and stop paying attention because you never know when something like this will happen. If trends break, either long or short-term, you have to heed the warning.
The small caps, which had been lagging the larger stock indexes, have made up some ground and the Russell 2000 is now in new high territory. It looks like a possible inverted head and shoulders pattern, which tends to be bullish, but like any other breakout I like to see it close above the resistance for at least 3 days before confirming it.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
It is Thanksgiving week and that is historically a decent week for stocks, particularly the the day before and the day after the Thursday holiday. The Friday after Thanksgiving is a short trading day as the markets will close at 1 PM ET.
Chart provided courtesy of www.sentimentrader.com, analysis by TSP Talk
The Monday after the holiday (day +2) has struggled in the past and today (day -3), also has a negative bias.
Bonds are in a head and shoulders pattern and they generally do not end well. The AGG bond fund is just above the 200-day EMA, but the support line near 106.75 is very important.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
A break down from that level would give an initial target of about 105.0 - 105.5 on this chart.
The S&P 500 futures are up strongly as I write this Sunday night as it looks like we'll get another emotional Monday morning gap open, which are not the most trustworthy moves. If you recall, we had a big open last Monday but ended the day in negative territory. A big positive open will surely turn some of the few remaining bears into bulls as we wait for that capitulation moment from those nervous bears, which could mark a top.
Thanks for reading! We'll see you back here tomorrow.
Tom Crowley
Posted daily at TSP Talk Market Commentary
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