Stocks began the holiday shortened week with a massive rally, and that's a classic holiday reversal. We had a positive trending stock market pull back in the days leading up to a major holiday weekend, then the positive trend resumed after the holiday. The C and S-funds gained over 2% on the day, and the I-fund also did well, but strength in the dollar had it lagging the US funds. Bonds were up as yields pulled back.
Market breadth was overwhelmingly positive with advancing share volume more than 4 times that of declining on both the NYSE and the Nasdaq. The Nasdaq was was actually a 5X.
Has the market come too far too fast? Well, the big gains didn't even get back last week's losses yet so there's room to run. Plus, historically when the stock market recovers most of a 15% to 20% decline off the highs, it almost always retests those prior highs before either a breakout to new highs, or possibly a double top pullback. I'll deal with that when we get there but for now there seems to be a beeline for those prior highs.
The 10-year Treasury Yield cooperated by pulling back from its recent highs, so it remains range bound until it tells us otherwise. We'll have to see if that 4.4% support area will hold with all of the economic data being released this week.
The dollar (UUP) also bounced back from last week's pre-holiday reversal. The jury is still out on whether this is trying to form a bottom. Yesterday's rally filled in a small open gap and hit overhead resistance so if this is going to rollover again, this may be the spot.
The S&P 500 (C-fund) held after testing and holding at the 200-day moving average on Friday. Yesterday it gapped up back into the ascending trading channel. That leaves the open gap from May 12 still open below, and that could eventually get filled, but the dip buyers are back in business and they may not let this fall that far down anytime soon -- that is, unless there is another headline that changes the sentiment.
One thing that could change investor sentiment is Nvidia's earnings report which comes out after the closing bell today. This market leader in the AI revolution struggled early this year before finally bottoming in that first week of April, and since then it has been tearing it up. It's latest move has been creating a bull flag during last week's pre-holiday reversal. It broke out of that flag yesterday, but tonight's earnings will confirm or challenge that bullish move. As I mentioned above, history suggests this could at make a move to test the old highs before it has another major pullback, but with earnings coming out, it must impress investors or things could change in a hurry.
Consumer Confidence beat expectations yesterday coming in at 98 vs. 87 expected, as this busy economic data report week got off to a good start. Up next, FOMC meeting minutes, GDP data, PCE inflation data, Chicago PMI, and the final Michigan Consumer Sentiment reading for May.
The DWCPF (S-fund) looks fine here but it has continued to lag despite many calls from pundits for small caps to start catching up. Just getting back to the December highs would be a 10% gain. There is some possible resistance near 2300, and that resistance is falling, but even that would be nearly a 5% gain from the current level.
ACWX (I-fund) had a good day and it made a new high for the year yesterday but this was a good example of what I mean when I say that a strong dollar doesn't necessarily send the I-fund lower, but it generally makes it underperforms the US stock market.
BND (bonds / F-fund) was up with yields down and the range is still intact.
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
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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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Market breadth was overwhelmingly positive with advancing share volume more than 4 times that of declining on both the NYSE and the Nasdaq. The Nasdaq was was actually a 5X.
Has the market come too far too fast? Well, the big gains didn't even get back last week's losses yet so there's room to run. Plus, historically when the stock market recovers most of a 15% to 20% decline off the highs, it almost always retests those prior highs before either a breakout to new highs, or possibly a double top pullback. I'll deal with that when we get there but for now there seems to be a beeline for those prior highs.
The 10-year Treasury Yield cooperated by pulling back from its recent highs, so it remains range bound until it tells us otherwise. We'll have to see if that 4.4% support area will hold with all of the economic data being released this week.
The dollar (UUP) also bounced back from last week's pre-holiday reversal. The jury is still out on whether this is trying to form a bottom. Yesterday's rally filled in a small open gap and hit overhead resistance so if this is going to rollover again, this may be the spot.
The S&P 500 (C-fund) held after testing and holding at the 200-day moving average on Friday. Yesterday it gapped up back into the ascending trading channel. That leaves the open gap from May 12 still open below, and that could eventually get filled, but the dip buyers are back in business and they may not let this fall that far down anytime soon -- that is, unless there is another headline that changes the sentiment.
One thing that could change investor sentiment is Nvidia's earnings report which comes out after the closing bell today. This market leader in the AI revolution struggled early this year before finally bottoming in that first week of April, and since then it has been tearing it up. It's latest move has been creating a bull flag during last week's pre-holiday reversal. It broke out of that flag yesterday, but tonight's earnings will confirm or challenge that bullish move. As I mentioned above, history suggests this could at make a move to test the old highs before it has another major pullback, but with earnings coming out, it must impress investors or things could change in a hurry.
Consumer Confidence beat expectations yesterday coming in at 98 vs. 87 expected, as this busy economic data report week got off to a good start. Up next, FOMC meeting minutes, GDP data, PCE inflation data, Chicago PMI, and the final Michigan Consumer Sentiment reading for May.
The DWCPF (S-fund) looks fine here but it has continued to lag despite many calls from pundits for small caps to start catching up. Just getting back to the December highs would be a 10% gain. There is some possible resistance near 2300, and that resistance is falling, but even that would be nearly a 5% gain from the current level.
ACWX (I-fund) had a good day and it made a new high for the year yesterday but this was a good example of what I mean when I say that a strong dollar doesn't necessarily send the I-fund lower, but it generally makes it underperforms the US stock market.
BND (bonds / F-fund) was up with yields down and the range is still intact.
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.
