Momentum from Tuesday's rally rolled in to the open on Wednesday but the day's highs were made within the first 20 minutes of trading. Stocks finished with decent gains, the Dow gained 84-points, but closed off the highs as the indices continue to get stretched and are possibly set up for some profit taking in April.
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Time and time again when it looked like the market was ready to implode, or least rollover for a pullback, the Fed has stepped up this year and fighting the Fed has been a losing battle. That has been true for 8 or 9 years now, and just when you think they can't do it again, the markets respond positively to their actions. And why not, I guess? When the Fed did raise rates at the end of last year, we saw what happened to start 2016. I guess they don't want that to happen again so rates are going to remain low this year. And with interest rates so low, where else can you get any decent return on your money but the stock market? I assume that one day we will all pay a price for this unnatural monetary policy, but Wall Street doesn't appear to be worried about that day right now.
On Friday morning we get the March jobs report and estimates are looking for a gain of 200,000 jobs, and an unemployment rate of 4.9%. The Jobs Report Contest is now open in the forum. Click here for more info.
The S&P 500 / C-Fund popped over the descending resistance line off the November / December highs and is sitting in an area that should not be too easy to break, but the we've underestimated the market for several weeks now. Officially the "middle of the head test" is in the area of 2050 to maybe 2080. It's not really a thin red line like we draw below. The market doubters have been wrong and are getting impatient. The buy and holders have been rewarded, but eventually they pay a price.
Head test of the head and shoulders pattern:
The DWCPF (Dow Completion Index / Small Caps) moved above the 200-day EMA for the first time in many months yesterday, but could not close above it.
The EFA (EAFE Index / I-fund) rallied opening a new small gap, but still remains below the 200-day EMA.
The HYG High Yield Bond Fund moved back above the 200-day EMA, just enough to fill that small open gap near 81.70. Interesting pivot point here.
Crude oil tried to rally early but peaked just before noon ET and closed near the lows. This is a 15-minute oil futures bar chart.
This chart that I posted a couple of times this year, starting the first week of the year, has been a very good indicator for the market. This is the average return of the Dow during an election year compared to an average year over all. It shows that stocks start out weakly in an election year. Check. Bottom in February. Check. Then peak again in early April. If you followed this chart you would have looked like a genius this year. As I mentioned above, we may have set up for some profit taking.
The AGG (Bonds / F-fund) opened lower but nearly climbed back to break even. It held above the breakout line so that's a good sign for bonds.
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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Time and time again when it looked like the market was ready to implode, or least rollover for a pullback, the Fed has stepped up this year and fighting the Fed has been a losing battle. That has been true for 8 or 9 years now, and just when you think they can't do it again, the markets respond positively to their actions. And why not, I guess? When the Fed did raise rates at the end of last year, we saw what happened to start 2016. I guess they don't want that to happen again so rates are going to remain low this year. And with interest rates so low, where else can you get any decent return on your money but the stock market? I assume that one day we will all pay a price for this unnatural monetary policy, but Wall Street doesn't appear to be worried about that day right now.
Japan tried this in the 1990's and with their Nikkei Index still down 57% from the 1989 highs (27 years ago), you think the world would have learned a lesson that 0% interest rates can only stimulate an economy for so long.
On Friday morning we get the March jobs report and estimates are looking for a gain of 200,000 jobs, and an unemployment rate of 4.9%. The Jobs Report Contest is now open in the forum. Click here for more info.
The S&P 500 / C-Fund popped over the descending resistance line off the November / December highs and is sitting in an area that should not be too easy to break, but the we've underestimated the market for several weeks now. Officially the "middle of the head test" is in the area of 2050 to maybe 2080. It's not really a thin red line like we draw below. The market doubters have been wrong and are getting impatient. The buy and holders have been rewarded, but eventually they pay a price.
Head test of the head and shoulders pattern:
The DWCPF (Dow Completion Index / Small Caps) moved above the 200-day EMA for the first time in many months yesterday, but could not close above it.
The EFA (EAFE Index / I-fund) rallied opening a new small gap, but still remains below the 200-day EMA.
The HYG High Yield Bond Fund moved back above the 200-day EMA, just enough to fill that small open gap near 81.70. Interesting pivot point here.
Crude oil tried to rally early but peaked just before noon ET and closed near the lows. This is a 15-minute oil futures bar chart.
This chart that I posted a couple of times this year, starting the first week of the year, has been a very good indicator for the market. This is the average return of the Dow during an election year compared to an average year over all. It shows that stocks start out weakly in an election year. Check. Bottom in February. Check. Then peak again in early April. If you followed this chart you would have looked like a genius this year. As I mentioned above, we may have set up for some profit taking.
The AGG (Bonds / F-fund) opened lower but nearly climbed back to break even. It held above the breakout line so that's a good sign for bonds.
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.
