Stocks opened higher on Monday, but like Friday the highs were made in those first moments of trading. Up 187 at the morning high, the Dow closed down 148-points on the day, so it took a 335-point haircut after the open. Most of the major indices lost less than 1%, but the Transports shed 1.2%. The I-fund held onto some gains but mostly because of the timing of the losses in the U.S. stocks.
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Stocks started to accelerate to the downside after Israel's Prime Minister Benjamin Netanyahu announced that Iran did not come clean on its nuclear program. It looked like stocks were heading that way anyway, but that's how the news reported it.
Last year, and into 2016, the buy and holders were in charge and market timers were the ones who were made to look a little silly. It's been a few months now and it has been clear that 2018 is not the 2017 market anymore. The dip buyers have been punished this year - if they haven't been nimble. Yes, you could buy a dip, but you had to look to take profits when possible. If you haven't made the adjustment you're probably lagging the market during these first 4 months of the year, just as most market timers lagged those buy and holders last year. A quick check of the 10-year Treasury yield showed that it pulled back again from that emotional 3% level, and it is now testing the February and March highs for support. That gap near 2.86% remains open and is a possible downside target if that old resistance line fails.
May begins the historically weaker 6-month part of the year but of course that is based on long-term averages and not something true every year. But you can see that May has a lot of negative average days in it going back 30 years so the stock market does have a bit of a breeze in its face this month.
Chart provided courtesy of www.sentimentrader.com
Apple reports after the bell today and that could be a market mover, although we've seen some earnings driven rallies fade pretty quickly this quarter so if we do get a rally off of it, perhaps it will trigger another bout of profit taking? Or, perhaps it will trigger a higher low for this correction? I don't know, but on the 1st of February Apple's report after the bell preceded a sharp market decline on Feb. 2, although that was not solely because of Apple - it was also the day the January jobs report was released. This quarter they get a couple of days of cushion before the jobs report.
The April Jobs Report comes out on Friday and estimates are looking for a gain of 190,000 jobs and an unemployment rate of 4.0%.
A two-day FOMC meeting starts today but no press conference is schedule, nor is there an expected rate hike, but certainly possible clues to future action.
The S&P 500 / C-fund created a negative outside reversal day after it failed again at the 50-day EMA. Can another test of the 200-day EMA hold again, or is this like a rubber ball bouncing toward the edge of a table? It certainly is a benefit having the 200-day EMA just below since it is one of the strongest support levels in a bull market. But if it fails you tend to get a rush for the exit so be careful here. Once again we're at a spot that could be a great buying opportunity, or the start of something more sinister should support fail.
A closer look at the S&P 500 Index shows a small gap still open that I hadn't noticed before. Filling that gap may be all this market is trying to do since open gaps are generally quite rare on the S&P chart.
The small caps / S-fund may have started to breakdown from that small bear flag, but the larger concern is the fate of the bearish looking head and shoulders pattern that we've been tracking for a little while.
The Dow Transportation Index remained in its small bear flag after a 1% decline yesterday. It continues to trade within that range from the February closing lows to the multi-month highs near 10,800, and a breakdown in that bear flag would likely see it test the lower end of the range again.
The EAFE / I-fund was up slightly on the day and looked good early but the strengthening dollar held it back. Then the U.S. market started to rollover so there may be some downside catch-up here tomorrow, unless the dollar can reverse course.
A look at the dollar shows that it closed above the 200-day EMA again after a 0.42% rally. You can see that it hit some potential resistance, but that resistance is rising.
The AGG (Bonds / F-fund) saw some early life but we got a negative reversal and while it ended the day with a modest gain, it closed near the lows of the day setting up a possible down day for bonds on Tuesday.
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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[TD]
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[TD="align: center"]
[/TR]
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Stocks started to accelerate to the downside after Israel's Prime Minister Benjamin Netanyahu announced that Iran did not come clean on its nuclear program. It looked like stocks were heading that way anyway, but that's how the news reported it.
Last year, and into 2016, the buy and holders were in charge and market timers were the ones who were made to look a little silly. It's been a few months now and it has been clear that 2018 is not the 2017 market anymore. The dip buyers have been punished this year - if they haven't been nimble. Yes, you could buy a dip, but you had to look to take profits when possible. If you haven't made the adjustment you're probably lagging the market during these first 4 months of the year, just as most market timers lagged those buy and holders last year. A quick check of the 10-year Treasury yield showed that it pulled back again from that emotional 3% level, and it is now testing the February and March highs for support. That gap near 2.86% remains open and is a possible downside target if that old resistance line fails.
May begins the historically weaker 6-month part of the year but of course that is based on long-term averages and not something true every year. But you can see that May has a lot of negative average days in it going back 30 years so the stock market does have a bit of a breeze in its face this month.
Chart provided courtesy of www.sentimentrader.com
Apple reports after the bell today and that could be a market mover, although we've seen some earnings driven rallies fade pretty quickly this quarter so if we do get a rally off of it, perhaps it will trigger another bout of profit taking? Or, perhaps it will trigger a higher low for this correction? I don't know, but on the 1st of February Apple's report after the bell preceded a sharp market decline on Feb. 2, although that was not solely because of Apple - it was also the day the January jobs report was released. This quarter they get a couple of days of cushion before the jobs report.
The April Jobs Report comes out on Friday and estimates are looking for a gain of 190,000 jobs and an unemployment rate of 4.0%.
A two-day FOMC meeting starts today but no press conference is schedule, nor is there an expected rate hike, but certainly possible clues to future action.
The S&P 500 / C-fund created a negative outside reversal day after it failed again at the 50-day EMA. Can another test of the 200-day EMA hold again, or is this like a rubber ball bouncing toward the edge of a table? It certainly is a benefit having the 200-day EMA just below since it is one of the strongest support levels in a bull market. But if it fails you tend to get a rush for the exit so be careful here. Once again we're at a spot that could be a great buying opportunity, or the start of something more sinister should support fail.
A closer look at the S&P 500 Index shows a small gap still open that I hadn't noticed before. Filling that gap may be all this market is trying to do since open gaps are generally quite rare on the S&P chart.
The small caps / S-fund may have started to breakdown from that small bear flag, but the larger concern is the fate of the bearish looking head and shoulders pattern that we've been tracking for a little while.
The Dow Transportation Index remained in its small bear flag after a 1% decline yesterday. It continues to trade within that range from the February closing lows to the multi-month highs near 10,800, and a breakdown in that bear flag would likely see it test the lower end of the range again.
The EAFE / I-fund was up slightly on the day and looked good early but the strengthening dollar held it back. Then the U.S. market started to rollover so there may be some downside catch-up here tomorrow, unless the dollar can reverse course.
A look at the dollar shows that it closed above the 200-day EMA again after a 0.42% rally. You can see that it hit some potential resistance, but that resistance is rising.
The AGG (Bonds / F-fund) saw some early life but we got a negative reversal and while it ended the day with a modest gain, it closed near the lows of the day setting up a possible down day for bonds on Tuesday.
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.
