Stocks were higher on Thursday with a surge coming in afternoon trading when there was speculation that there was some progress in the Mexican trade negotiations. Not all indices were treated equally, however. The large cap indices did well but the more economically sensitive small caps and Transportation indexes lagged noticeably. There was some late selling as investors prepared for today's May jobs report.
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The dollar was down on the day which gave a boost to the beaten down oil and copper markets, although the gains yesterday there wasn't enough to get back Wednesday's losses. Also, the weakness in the dollar helped more global and defensive stocks like McDonald's and Coke lead the market higher yesterday, and while the Nasdaq had a solid positive day, there were actually more stocks down in that index yesterday so growth stocks were lagging.
The big headline everyone is waiting for now is the May jobs report which comes out on Friday before the bell. Estimates are looking for a gain of 180,000 jobs, an unemployment rate of 3.7%, and wage growth of +0.3%. A weaker than expected report could waken the Fed doves as everyone is hoping they start talking more about a rate cut. No one is overly excited about weak economic data, since that's a concern and the bond market has been telling us that for a while now, but in this case anything that will get the Fed cutting again could trigger some buying. That said, I would think any rally off of a weak report would be sold rather quickly.
The S&P 500 (C-fund) rallied big for a third straight day on Thursday and this relief rally has had some teeth so far, but it has already reached a couple of upside targets we were looking for - the 50-day EMA and the top of that open gap. The next target, should it continue, would be the failed mid-May peaks. I don't know if it can get there and it may take a special jobs report and / or a move from the Fed to do so.
The DWCPF (S-fund) lagged yesterday, struggling to close with a gain. The Russell 2000 small cap index actually closed with a loss of 0.22% so it was the mid-caps that helped keep this fund in positive territory.
The Dow Transportation Index lost nearly 1% yesterday so it did not participate in the rally. After an oversold bounce, something that tends to happen as the 50-day EMA crosses below the 50-day EMA, those rallies don't tend to last.
The EFA (I-Fund) had a solid day but it too stalled at the 50-day EMA and is at the top of that flag-like formation. The dollar was down helping out here.
With the weakness in the dollar, oil and copper both rallied but you can see that they didn't even get above the losses from Wednesday.
The AGG (Bonds / F-fund) was flat to slightly lower and rather than peaking it is starting to look like bear flag. There was a similar formation back in March that preceded a big rally. Is the bond market expecting a weak jobs report? If we do get a weak report, yields will likely drop and bond prices would rally, and that's the setup right now.
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. Have a great weekend!
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 dollar was down on the day which gave a boost to the beaten down oil and copper markets, although the gains yesterday there wasn't enough to get back Wednesday's losses. Also, the weakness in the dollar helped more global and defensive stocks like McDonald's and Coke lead the market higher yesterday, and while the Nasdaq had a solid positive day, there were actually more stocks down in that index yesterday so growth stocks were lagging.
The big headline everyone is waiting for now is the May jobs report which comes out on Friday before the bell. Estimates are looking for a gain of 180,000 jobs, an unemployment rate of 3.7%, and wage growth of +0.3%. A weaker than expected report could waken the Fed doves as everyone is hoping they start talking more about a rate cut. No one is overly excited about weak economic data, since that's a concern and the bond market has been telling us that for a while now, but in this case anything that will get the Fed cutting again could trigger some buying. That said, I would think any rally off of a weak report would be sold rather quickly.
The S&P 500 (C-fund) rallied big for a third straight day on Thursday and this relief rally has had some teeth so far, but it has already reached a couple of upside targets we were looking for - the 50-day EMA and the top of that open gap. The next target, should it continue, would be the failed mid-May peaks. I don't know if it can get there and it may take a special jobs report and / or a move from the Fed to do so.
The DWCPF (S-fund) lagged yesterday, struggling to close with a gain. The Russell 2000 small cap index actually closed with a loss of 0.22% so it was the mid-caps that helped keep this fund in positive territory.
The Dow Transportation Index lost nearly 1% yesterday so it did not participate in the rally. After an oversold bounce, something that tends to happen as the 50-day EMA crosses below the 50-day EMA, those rallies don't tend to last.
The EFA (I-Fund) had a solid day but it too stalled at the 50-day EMA and is at the top of that flag-like formation. The dollar was down helping out here.
With the weakness in the dollar, oil and copper both rallied but you can see that they didn't even get above the losses from Wednesday.
The AGG (Bonds / F-fund) was flat to slightly lower and rather than peaking it is starting to look like bear flag. There was a similar formation back in March that preceded a big rally. Is the bond market expecting a weak jobs report? If we do get a weak report, yields will likely drop and bond prices would rally, and that's the setup right now.
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. Have a great weekend!
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.
