Stocks opened on Friday looking for direction with the bulls and bears battling for control. After a couple of swings back and forth, the bulls took control and stepped on the accelerator during the last hour of trading. The Dow ended the day with a 191-point gain, cutting down on the weekly losses for stocks.
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The I-fund lagged on Friday with the late surge in U.S. indices, but it bested the U.S. TSP stock funds by well over 2% for the week with its 1.67% gain. Bonds were down on Friday but the F-fund also had a nice week picking up 0.5%.
It was a week filled market catalysts from earnings season kicking in, a poor retail sales number that sent stocks reeling, to a crash in the Swiss franc that sent world-wide indices on a wild ride for about several hours. To end a week like that with a big rally on an options expiration Friday leading into a 3-day holiday weekend has investors wondering what the heck next week could have in store for us.
Yesterday China's Shanghai Index lost an astounding 7.7% on stricter margin requirements and you might expect that to impact our markets, but surprisingly, even the Japanese Nikkei closed with solid gains despite that major event in Asia.
Besides earnings continuing to roll in, another possible market mover this week is the European Central Bank's (ECB) decision on interest rates, which will be on Thursday.
The SPY (S&P 500 / C-fund) has been trying hard to hold in the high 190's as we've seen multiple rebounds in that area over the last month when it gets down that low. It has closed below the 50-day EMA for 5-straight days, which should concern us, so in the early action this week it will be important for the bulls to push it back above 202 or so.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
This chart shows the SPY's 100-day moving average, and that's being tested again right now. There was only one major breakdown in the last couple of years (last October), with one other brief failure Feb. 2014).
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Wilshire 4500 (S-fund) is in the same inverted head and shoulders pattern, and this one is pretty classic with its horizontal neckline. If this ever does breakout, the upside projection would be in the neighborhood of +10% to 12%.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Russell 2000 has repeatedly tested the 200-day EMA with the one big failure in September / October. This needs to hold and get as far above from that EMA as possible. The longer it flirts in that area the more likely it will fail again.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Dow Transportation Index is also flirting with trouble. It has been trading below its 50-day EMA for most of the last two weeks and the support near 8600 really needs to hold or this could be the first official flash of trouble for the U.S. stock market.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The EFA (EAFE Index / I-fund) has shown recent strength but remains in a downtrend and it is about to test the overhead resistance.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The AGG (Bonds / F-fund) was down on Friday but remains is a short-term uptrend. Bonds had a good week last week with stocks being down. I've said this before, but I don't know how much lower yields can go if we're in a supposed economic recovery. The two just don't go together (low yields and a strong economy.)
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
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Thanks for reading! We'll see you back here tomorrow.
Tom Crowley
Posted daily at TSP Talk Market Commentary
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.
