Stocks were making another round of new highs again yesterday as the Nasdaq led with a 1% gain, the S&P was up 0.57%, and small caps added 0.36%. The dollar was down, the I-fund was up, and bonds were slightly lower but basically flat. The Dow gained 61-points, about 42-points off the highs of the day.
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Some optimistic comments from the Canadian Foreign Minister regarding trade boosted stocks early, and as we've been saying, during this very light volume trading week, headlines will move the market. It's been mostly good news and the bears have pretty much thrown in the towel - at least until after the holiday.
We're hearing the "melt up" phrase being used again, something we heard in January, but of course we know what happened in late January.
I've been pretty defensive during this month, which has obviously been wrong, but we had a set up for a sell the news reaction to the strong earnings season, weak seasonality, political turmoil, trade issues, and some excessive readings in many indicators, but that didn't stop the market from having a big month and climbing that proverbial wall of worry.
How long can it go on? That's the question, and as we learned in 2017 and into early 2018, a lot longer than might seem reasonable, because sometimes momentum is all the market needs. Now one thing that can make markets turn is a new month or a holiday weekend, and we have both coming up, so let's see if the bears do show up in September. They've obviously been asleep.
It looks like we may see a +3%, maybe even 4% gain in the month of August, normally one of the weaker months of the year. Since the C-fund was created in 1988 there were 3 years where August was up 4%. The following September was negative each time. If we go to 3% than it was 4 out of 5 Septembers were negative with only 2009 showing a gain.
And here's how those three +4% Augusts were met in September...
1994...
2000...
2014...
Will I be a fool if September keeps rising? Of course. The market is always right. We can only speculate.
The S&P 500 / C-fund moved to another level of new highs and is now trading above the rising trading channel so it is extended and this kind of action could be what the pre-holiday action is doing rather than a pre-holiday reversal. There's an open gap down by 2875 so I would expect that to be filled sooner rather than later, but it would have to fall back within the trading channel to do so, which means that old resistance line would have to break down.
The small caps (S-fund) is also above its longer term resistance line, although just under another one. Again, this modest breakout could be pre-holiday related.
The EAFE (I-fund) has been rallying on the dollar's recent dip but taking a look at the German DAX, one of the main components of the I-fund, you can see that it is at another major test area in its recent bear market - just below the key moving averages.
The AGG (bonds) was down slightly so it is back within its bearish rising wedge. This is starting to look precarious and the recent rally in bonds may be winding down.
The weekly chart show the longer-term resistance at the recent high.
And the monthly chart confirms that, and that it is no longer in that long-term uptrend since it fell below that rising support line in January.
It's that time of year again... time for the annual Last Man Standing NFL Contest. It's free.
More Information: Last Man Standing Contest
http://www.tsptalk.com/mb/site-news-and-announcements/30639-last-man-standing-2018-a.html
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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[TD][/TD]
[TD="align: center"]
[/TR]
[/TABLE]
Some optimistic comments from the Canadian Foreign Minister regarding trade boosted stocks early, and as we've been saying, during this very light volume trading week, headlines will move the market. It's been mostly good news and the bears have pretty much thrown in the towel - at least until after the holiday.
We're hearing the "melt up" phrase being used again, something we heard in January, but of course we know what happened in late January.
I've been pretty defensive during this month, which has obviously been wrong, but we had a set up for a sell the news reaction to the strong earnings season, weak seasonality, political turmoil, trade issues, and some excessive readings in many indicators, but that didn't stop the market from having a big month and climbing that proverbial wall of worry.
How long can it go on? That's the question, and as we learned in 2017 and into early 2018, a lot longer than might seem reasonable, because sometimes momentum is all the market needs. Now one thing that can make markets turn is a new month or a holiday weekend, and we have both coming up, so let's see if the bears do show up in September. They've obviously been asleep.
It looks like we may see a +3%, maybe even 4% gain in the month of August, normally one of the weaker months of the year. Since the C-fund was created in 1988 there were 3 years where August was up 4%. The following September was negative each time. If we go to 3% than it was 4 out of 5 Septembers were negative with only 2009 showing a gain.
And here's how those three +4% Augusts were met in September...
1994...
2000...
2014...
Will I be a fool if September keeps rising? Of course. The market is always right. We can only speculate.
The S&P 500 / C-fund moved to another level of new highs and is now trading above the rising trading channel so it is extended and this kind of action could be what the pre-holiday action is doing rather than a pre-holiday reversal. There's an open gap down by 2875 so I would expect that to be filled sooner rather than later, but it would have to fall back within the trading channel to do so, which means that old resistance line would have to break down.
The small caps (S-fund) is also above its longer term resistance line, although just under another one. Again, this modest breakout could be pre-holiday related.
The EAFE (I-fund) has been rallying on the dollar's recent dip but taking a look at the German DAX, one of the main components of the I-fund, you can see that it is at another major test area in its recent bear market - just below the key moving averages.
The AGG (bonds) was down slightly so it is back within its bearish rising wedge. This is starting to look precarious and the recent rally in bonds may be winding down.
The weekly chart show the longer-term resistance at the recent high.
And the monthly chart confirms that, and that it is no longer in that long-term uptrend since it fell below that rising support line in January.
It's that time of year again... time for the annual Last Man Standing NFL Contest. It's free.
More Information: Last Man Standing Contest
http://www.tsptalk.com/mb/site-news-and-announcements/30639-last-man-standing-2018-a.html
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.
