Stocks were down on Friday after Wednesday's big negative reversal action and we got a rare negative return for Thanksgiving week. The Dow ended the day down 179-points. The losses were modest in the other indices but that's unusual for the Friday after Thanksgiving, although as I've mentioned before, often the Friday after Thanksgiving is down if Wednesday was up, or vice versa.
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The S&P futures continued lower on Friday after the close but we are getting a bit of a bounce in the early futures trading on Sunday. Positive opens have been sold repeatedly of late, so we'll see if the bulls have anything to back up this initial bounce to start the week.
This post holiday week doesn't have the best seasonal record, but we could also look at it as a post holiday reversal, meaning the action after the holiday tends to counter the action just before it. That would give the bulls an advantage if that is the case. The question is, why would the normally strong holiday week be so weak? If we were in a bull market I'd say we were getting a good opportunity to buy here, but something feels different this time. We haven't been in a bear market for 10 years so perhaps we're due and need to prepare for a different type of market.
The G-20 meeting starts on the 29th and that could be a market mover and investors hope it's a market changer as they wait for some red meat on tariffs and interest rates. A deal being made with China this week could change everything since it is one of the major unknowns for corporations going forward (interest rates being another), and that is why it has been so tough for them to give accurate guidance for 2019.
Besides the G-20, there are several other geopolitical events out there right now that could impact markets in the coming weeks including the Brexit drama intensifying, the Russians firing on Ukrainian ships, the Mueller investigation getting more attention again, and with the Democrats in charge of the House now, that could be critical. Plus the asylum seeker's caravan is slowly reaching the border, although that one may not be a market mover. So there is a lot going on as we head into the final stretch of 2018.
As you'll see below in the charts, the S&P 500 has a lot of support within 1% of Friday's close. But if that support can't hold, it could get rough out there.
The S&P 500 / C-fund has acted poorly for the last two weeks or so, and the normally strong Thanksgiving week did nothing to help. If anything, the action was worse because we continue to see failed intraday rallies and weak closes. If there's any good news it is that a successful test of the lows could create a bottom, and as you'll see in these charts, there is a lot of support.
That "h" formation often turns into a "W" bottom. It can bounce off the old low or even break below it it giving us a high volume intraday reversal. That's bull market action.
... but when it doesn't hold...
This year to date chart shows the mini-breakdown last week as it fell below that rising support line off the two early 2018 lows. But you can see several other layers of potential support below. We're looking at levels between 2500 and 2650 and that's a lot of movement in the S&P. If the February low gets tested, that would be more than 100 S&P points below Friday's close. The next support that may be tested is that 2600 area, or the October low.
The weekly chart takes out some of the noise and you can see longer-term support near 2600. It looks like solid support, but if it breaks there will likely be a big run for the exits.
The DWCPF (S-fund) has held up the last two trading days to outperform the large caps. It has tested the October lows already, and held so far, but the "h" formation may still be vulnerable if the bulls don't push it a little here.
The Dow Transportation Index held onto a small gain on Friday and seems to be getting an oversold bounce since the 50 / 200 EMA crossover, but there's work to be done here before it is considered bullish.
The EAFE Index / I-fund has still not tested the October lows, which is a little surprising, but this index has been so beaten down this year there may be some value buying keeping it afloat. But right now the chart looks bad and needs some help.
The AGG (bonds / F-fund) rallied early but gave up those gains and closed at the lows. It seems to want to stay within that 104 - 104.8 range.
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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The S&P futures continued lower on Friday after the close but we are getting a bit of a bounce in the early futures trading on Sunday. Positive opens have been sold repeatedly of late, so we'll see if the bulls have anything to back up this initial bounce to start the week.
This post holiday week doesn't have the best seasonal record, but we could also look at it as a post holiday reversal, meaning the action after the holiday tends to counter the action just before it. That would give the bulls an advantage if that is the case. The question is, why would the normally strong holiday week be so weak? If we were in a bull market I'd say we were getting a good opportunity to buy here, but something feels different this time. We haven't been in a bear market for 10 years so perhaps we're due and need to prepare for a different type of market.
The G-20 meeting starts on the 29th and that could be a market mover and investors hope it's a market changer as they wait for some red meat on tariffs and interest rates. A deal being made with China this week could change everything since it is one of the major unknowns for corporations going forward (interest rates being another), and that is why it has been so tough for them to give accurate guidance for 2019.
Besides the G-20, there are several other geopolitical events out there right now that could impact markets in the coming weeks including the Brexit drama intensifying, the Russians firing on Ukrainian ships, the Mueller investigation getting more attention again, and with the Democrats in charge of the House now, that could be critical. Plus the asylum seeker's caravan is slowly reaching the border, although that one may not be a market mover. So there is a lot going on as we head into the final stretch of 2018.
As you'll see below in the charts, the S&P 500 has a lot of support within 1% of Friday's close. But if that support can't hold, it could get rough out there.
The S&P 500 / C-fund has acted poorly for the last two weeks or so, and the normally strong Thanksgiving week did nothing to help. If anything, the action was worse because we continue to see failed intraday rallies and weak closes. If there's any good news it is that a successful test of the lows could create a bottom, and as you'll see in these charts, there is a lot of support.
That "h" formation often turns into a "W" bottom. It can bounce off the old low or even break below it it giving us a high volume intraday reversal. That's bull market action.
... but when it doesn't hold...
This year to date chart shows the mini-breakdown last week as it fell below that rising support line off the two early 2018 lows. But you can see several other layers of potential support below. We're looking at levels between 2500 and 2650 and that's a lot of movement in the S&P. If the February low gets tested, that would be more than 100 S&P points below Friday's close. The next support that may be tested is that 2600 area, or the October low.
The weekly chart takes out some of the noise and you can see longer-term support near 2600. It looks like solid support, but if it breaks there will likely be a big run for the exits.
The DWCPF (S-fund) has held up the last two trading days to outperform the large caps. It has tested the October lows already, and held so far, but the "h" formation may still be vulnerable if the bulls don't push it a little here.
The Dow Transportation Index held onto a small gain on Friday and seems to be getting an oversold bounce since the 50 / 200 EMA crossover, but there's work to be done here before it is considered bullish.
The EAFE Index / I-fund has still not tested the October lows, which is a little surprising, but this index has been so beaten down this year there may be some value buying keeping it afloat. But right now the chart looks bad and needs some help.
The AGG (bonds / F-fund) rallied early but gave up those gains and closed at the lows. It seems to want to stay within that 104 - 104.8 range.
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.
