Stocks rallied yesterday and the Dow's 10-point gain didn't represent the strength we saw in the broader indices. The small caps had a nice day, as did the I-fund, while bonds slipped a bit.
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The pre-holiday action saw some minor breakouts in a couple of indices, but trading around the holidays cannot always be trusted. For now, the bulls will take what the market gives them, and it looks pretty good, but the real test may come after the holiday weekend when pre-holiday action often gets reversed after the holiday.
The SPY (S&P 500 / C-fund) is once again flirting with new highs after Thursday's 0.24% gain. It remains above some key support levels, and the PMO is trying to cross back above its 10-day EMA. The chart looks good to me, but as I mentioned above, this is pre-holiday action and it could all reverse next week.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Nasdaq 100 (QQQ) broke out from a couple of patterns this week. On Wednesday it moved above the last descending resistance line (blue), and on Thursday it broke out above of a rising wedge pattern, which is not common. Again, the pre-holiday action has me a little suspicious, but there's no denying that this is bullish action.
Chart provided courtesy of of www.decisionpoint.com, analysis by TSP Talk
The Russell 2000 had a good day on Thursday and once again moved above the 200-day EMA, but it is still in the throes of a downtrend and below the 20 and 50-day EMAs.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Here's a concern: The number of stocks making new highs. Despite the S&P 500 making its third highest close ever on Thursday, the number of stocks within the S&P 500 making new highs just keeps getting lower and lower. This is a negative divergence that doesn't tend to end well. It's not usually a quick acting indicator, but I would have to guess that this strong divergence means we'll see a serious correction some time this summer.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Monday is Memorial Day and the market and TSP will be closed. Let's take a look at the historical performance of the S&P 500 surrounding Memorial Day. Friday is day # -1, which has a slight positive bias. 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
Bonds dipped again on Thursday as the pre-holiday reversal may have reversed bonds down. Could that mean bonds will resume higher next week? It would make sense if stocks go down, but we'll have to see if stocks are ready to rollover again, or if they want to finally make a serious breakout.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The IEF made a bull flag, which tend to break to the upside, but it still hasn't filled its open gap.
From tsp.gov: Holiday Closing: Some financial markets will be closed on Monday, May 26th in observance of the Memorial Day holiday. The Thrift Savings Plan will also be closed. Transactions that would have been processed Monday night (May 26th) will be processed Tuesday night (May 27th), at Tuesday's closing share prices.
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Thanks for reading! Happy Memorial Day to all! We honor all of those who have sacrificed for our great country. Enjoy your holiday weekend.
Tom Crowley
Posted daily at TSP Talk Market Commentary
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