Stocks rallied sharply on Wednesday and the Dow erased Tuesday's 137-point decline with a 159-point (+0.97%) gain. The broader indices lagged but still did well with the S&P gaining 0.84%, and small caps adding 0.6% (Russell was up 0.52%.) Bonds were down.
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The I-fund gained just 0.13% but the late drop in the dollar yesterday may help it out some today as it may not have been accounted for in Wednesday's share price.
The SPY (S&P 500 / C-fund) is above the 20-day EMA and the stubborn 188 level, but now we have to worry a possible bear flag. A nice rally today would negate that.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Yesterday the Nasdaq 100 (QQQ) made its highest close since April 2 and is comfortably above the 20 and 50-day EMAs. The 20-day EMA just moved back above the 50-day EMA, which is a good sign, but short-term it could mean it is slightly overbought. The big concern is that nasty rising wedge pattern (red), which have a strong tendency to break to the downside, and the top of the wedge could easily act as resistance right here. So here's a test between the wedge, and yesterday's breakout above the intermediate-term descending resistance line (blue).
Chart provided courtesy of of www.decisionpoint.com, analysis by TSP Talk
The Wilshire 4500 (S-fund) is still floundering and appears is going to be the lagging fund in 2014. Can the market have a good year and small caps be excluded? In 1998 the S&P 500 gained over 28% and the Russell 2000 was down 2.5%, so yes, it can happen.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
With Monday being a holiday and the market and TSP being closed, we'll take a look at the historical performance of the S&P 500 surrounding Memorial Day. Today (Thursday) is day # -2, which has a slightly positive bias. Friday also favors the bulls, but Tuesday is up less than 40% of the time. Then we get three strong days average-wise, ending the week.
Chart provided courtesy of www.sentimentrader.com, analysis by TSP Talk
The TLT pulled back yesterday and just about filled its open gap and support at the 20-day EMA held. The IEF has some more room on the downside if it is going to fill its open gap. Yesterday we said stocks could get a pop if those gaps try to get filled, and that's what we saw. But once those gaps are filled, the trend in bonds is still up, and that would be less bullish for stocks.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The yield on the 10-Year treasury looks like it wants to go down again (bullish for bonds and the F-fund) as another bear flag has been created, but how low can yields go? Obviously lower than I thought they would.
Chart provided courtesy of www.decisionpoint.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
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