Stocks rallied again on Friday and the stock market has done a remarkable job of repairing one of the ugliest starts to a month in a long time. The Dow was flat with 5 of the top weighted stocks in the index being down, but tech stocks were shining with the top 10 weighted stocks in the Nasdaq 100 showing a gain on Friday, and the Nasdaq Composite has now been up 1% or more for 4 straight days. Bond yields were down giving the F-fund a big gain.
If the bears are going to push back at all, this could be the area and time where they might try. While we saw some resistance crack late last week, there is still a wall of more resistance that the bulls will have to get through before the charts take on a bull market look. Meanwhile the crowd has become a lot more bullish than they were a week ago, and that could set up some short-term disappointment, if to do noting else but to get some investors leaning the wrong way again.
The S&P 500 (C-fund) pushed above that blue descending resistance line on Friday, and it managed to close above the 300-day average, which has been in the picture since that support held a couple of times in March, but once the chart fell below that average it has been tough resistance on the way back up. On Friday that changed. There is an open gap up near 5570 and technically that gap could be as high as 5671 where the S&P closed on April 2nd. In between the two is the 50 and 200-day EMAs so there a lot going on overhead.
We're seeing a lot of rare readings in the market recently, mostly bullish following the extreme negative / overly bearish indicators we witnessed a couple of weeks ago. But here's one on the S&P 500 weekly chart:
A positive outside reversal week was created after the dramatic reversal off the last Monday's low.
Like positive outside reversal days, this weekly one is a meaningfully bullish development, but perhaps be careful in the short-term. I just eye-balled it and could only find one other outside reversal week from in 2023, and it wasn't as obvious. Stocks did rally for another 4 weeks before peaking but the week directly following the outside week, was down.
And, take a look at the monthly chart. There's still three trading days left in April but barring a major collapse in the next few days, this looks very good for the longer-term.
The10-year Treasury Yield was down on Friday and it was the lowest close in almost three weeks. It also closed below some key support levels. As we've have been discussing, stabilizing here below 4.3% should be a good recipe for stocks. But the dollar may be even more important.
The dollar (UUP) made a low last Monday, and the recipe here for the stock market would be to see this stabilize and bottom. It held at a support area, but if we go further out...
... we see the UUP chart did break some longer term support this month, and that old support could try to act as resistance this week.
I know I talk about the dollar a lot and it's probably the equivalent of listening to someone explain insurance actuary formulas, but mark my words... if the dollar has bottomed, the bull market is back. The intermediate-term trend is still down for the stocks and we have to respect that, but if the dollar remains above that support, I'd be confidently buying any short term dips which, as we mentioned above, is possible after the tremendous 4-day rally we just experienced.
Friday we get the April jobs report. Estimates are looking for a gain of about 130,000 jobs.
DWCPF (S-fund) looks a lot like the S&P 500 chart so the analysis is similar. What may start to change is the interest in the S-fund if yields do continue to trend lower. Small caps tend to outperform in a declining interest rate environment. There's open gaps up near 2100 and down below 1950 so there's wiggle room in both directions in the short-term.
ACWX (I-fund) continues to grind higher but it has been lagging the US stock funds since the dollar started to rebound last week. If the dollar is bottoming, the I-fund may not be as attractive going forward relative to the US funds.
The BND (F-fund) pushed higher on Friday with yields falling lower, and it continues to try to carve out a higher low. The problem with the F-fund is that stocks will likely do better if this is moving up
Thanks so much for reading! We'll see you back here tomorrow.
Tom Crowley
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
Questions, comments, or issues with today's commentary? We can discuss it in the Forum.
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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 may use additional methods and strategies to determine fund positions.
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If the bears are going to push back at all, this could be the area and time where they might try. While we saw some resistance crack late last week, there is still a wall of more resistance that the bulls will have to get through before the charts take on a bull market look. Meanwhile the crowd has become a lot more bullish than they were a week ago, and that could set up some short-term disappointment, if to do noting else but to get some investors leaning the wrong way again.
The S&P 500 (C-fund) pushed above that blue descending resistance line on Friday, and it managed to close above the 300-day average, which has been in the picture since that support held a couple of times in March, but once the chart fell below that average it has been tough resistance on the way back up. On Friday that changed. There is an open gap up near 5570 and technically that gap could be as high as 5671 where the S&P closed on April 2nd. In between the two is the 50 and 200-day EMAs so there a lot going on overhead.
We're seeing a lot of rare readings in the market recently, mostly bullish following the extreme negative / overly bearish indicators we witnessed a couple of weeks ago. But here's one on the S&P 500 weekly chart:
A positive outside reversal week was created after the dramatic reversal off the last Monday's low.
Like positive outside reversal days, this weekly one is a meaningfully bullish development, but perhaps be careful in the short-term. I just eye-balled it and could only find one other outside reversal week from in 2023, and it wasn't as obvious. Stocks did rally for another 4 weeks before peaking but the week directly following the outside week, was down.
And, take a look at the monthly chart. There's still three trading days left in April but barring a major collapse in the next few days, this looks very good for the longer-term.
The10-year Treasury Yield was down on Friday and it was the lowest close in almost three weeks. It also closed below some key support levels. As we've have been discussing, stabilizing here below 4.3% should be a good recipe for stocks. But the dollar may be even more important.
The dollar (UUP) made a low last Monday, and the recipe here for the stock market would be to see this stabilize and bottom. It held at a support area, but if we go further out...
... we see the UUP chart did break some longer term support this month, and that old support could try to act as resistance this week.
I know I talk about the dollar a lot and it's probably the equivalent of listening to someone explain insurance actuary formulas, but mark my words... if the dollar has bottomed, the bull market is back. The intermediate-term trend is still down for the stocks and we have to respect that, but if the dollar remains above that support, I'd be confidently buying any short term dips which, as we mentioned above, is possible after the tremendous 4-day rally we just experienced.
Friday we get the April jobs report. Estimates are looking for a gain of about 130,000 jobs.
DWCPF (S-fund) looks a lot like the S&P 500 chart so the analysis is similar. What may start to change is the interest in the S-fund if yields do continue to trend lower. Small caps tend to outperform in a declining interest rate environment. There's open gaps up near 2100 and down below 1950 so there's wiggle room in both directions in the short-term.
ACWX (I-fund) continues to grind higher but it has been lagging the US stock funds since the dollar started to rebound last week. If the dollar is bottoming, the I-fund may not be as attractive going forward relative to the US funds.
The BND (F-fund) pushed higher on Friday with yields falling lower, and it continues to try to carve out a higher low. The problem with the F-fund is that stocks will likely do better if this is moving up
Thanks so much for reading! We'll see you back here tomorrow.
Tom Crowley
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
Questions, comments, or issues with today's commentary? We can discuss it in the Forum.
Daily Market Commentary Archives
For more info our other premium services, please go here... www.tsptalk.com/premiums.php
To get weekly or daily notifications when we post new commentary, sign up HERE.
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 may use additional methods and strategies to determine fund positions.
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