Stocks rallied sharply on Thursday with the Dow gaining 188-points and gains of over 1% across the board. We were due for an oversold relief rally, but how long can it last? Bonds saw modest losses.
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The S&P 500 (SPY) broke above its steep descending resistance line and there is some room overhead before any obvious resistance kicks in. Volume was light so investors were not overly excited to buy, but that could mean there are more on the sidelines with cash and to buy. The other side of that is that we may not want to trust a light volume rally after higher volume sell-off, but after carnage, we're due.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The annual chart shows that the rising trading channel support is still holding and it comes as the 20-day EMA is converging with the 50-day EMA, which as led to repeated oversold rallies in 2013.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The small caps of the Russell 2000 are lagging a bit as this IWM ETF could not get above Tuesday's high, something the S&P, Nasdaq, and Dow have done fairly easily. The IWM also hasn't broken above its descending trading channel, but if it can today, perhaps it will lead to the upside, but the jobs report will have to cooperate.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The 1929 chart continues to get more and more interesting as the comparison remains eerily similar. If the Dow can get up to about 16,000 - 16,200 on this rebound, you better hold onto something, because that's where things went south in a hurry in '29. On the positive side, that would be another 500 to 600 points from Thursday's close, so there may be some money to be made, albeit some nervous money. Of course this will never be exact match, but we're looking at direction and formation here for guidance.
Chart source: www.mcoscillator.com, analysis by TSP Talk
Bonds pulled back again and the two ETFs are about testing their 200-day EMAs, after breaking below their rising support line.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The yield on the 10-year Treasury bounced aggressively off of the 200-day EMA this week and this may be the key for bonds and the F-fund. As long as this yields stays above the 200-day EMA, I look at it as bearish for bonds and the F-fund.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The January jobs report comes out today (Friday) and consensus estimates are looking for a gain of about 175,000 jobs, and an unemployment rate of 6.7%.
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Thanks for reading! Have a great weekend!.
Tom Crowley
Posted daily at TSP Talk Market Commentary
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