04/06/26
The stock market was closed on Friday, but stocks opened sharply lower last Thursday after President Trump's address to the nation on Iran. The gap down open turned out to be the low of the day, and we saw a decent positive reversal day form with most of the major indices able to close in positive territory and at the highs of the day. Bonds were up as yields pulled back, but that could change after a stronger than expected jobs report on Friday morning.
The positive reversal day on Thursday was very a bullish for the charts, but there is work to be done. The reversal just put the ball in the bulls' court for a minute while we all digested the long weekend's war headlines. Was the rally last week one of those pre-holiday reversals, where the larger trend resumes now after the holiday? That's very possible, but things may still be overly stretched on the downside despite last week's modest rebound.
Oil is still one of the major catalysts, and whether the price is $80, $100, or $120, typically doesn't matter as much as which direction it is going. And of course the direction is being influenced by the day to day account of the situation in Iran and the Strait or Hormuz.
That said, stocks held up well despite a big increase in the price of oil on Thursday. Oil opened higher that day, but started to fade, hence stocks opened lower but started to rebound commensurate to the drop in the price of oil. But then oil started to bounce back, but stocks were holding up rather well. The indices closed near the highs of the day, but so did oil. That was different. Here is an intraday chart of the oil ETF USO, vs. the S&P 500.
Here's the problem with that price of oil as it retests the early March highs when the Strait of Hormuz started to get blocked.
Here is a long-term chart of the price of oil vs. the S&P 500. We know that inflation and a spike in oil prices in 2022 hurt stocks, and it took a pullback in oil to eventually see the bear market finally bottom. That may be the same situation this time around, but Thursday's action was a little different. Possibly because of the holiday reversal, or maybe something is actually changing.
The 10-year Treasury Yield also reversed as it rallied early, then flipped over and closed modestly lower. It remains above key support.
A much stronger than expected jobs report was released on Friday morning and that may give yields a reason to move up again this morning. The dramatic shift from the February report to the March report is interesting, and again we have to wonder what is going on at the BLS. Can this data be accurate? A loss of 133K one month, and a gain of 178K the next? Did something change or, to use a sports referee analogy, was this some kind of a make up call?
The S&P 500 (C-fund) looked destined for a breakdown on Thursday morning as the descending trading channel was looking very much intact, until that early morning positive reversal where the index was able to break back above the channel's resistance line. It remains below the 200-day moving average, and that's the technical problem, as that resistance often holds once the chart goes below it, so we start this week at an important pivot point.
The Dow Transportation Index had a nice day on Thursday, filling an overhead open gap in the process. But as we often see, the top of a filled gap can act as resistance, so we'll just have to see if this market leader can break through.
We'll get a heavy dose of economic data this week including some manufacturing data this morning, ADP employment data on Tuesday, PCE inflation data and the GDP on Thursday, and the CPI data and Michigan Sentiment data on Friday.
The futures opened sharply lower on Sunday evening presenting the possibility that last week was a pre-holiday reversal week and this week could be the reckoning. We can't always trust the overnight futures, as we saw on Thursday, and especially on a Sunday night, but oil futures were up sharply as well, and that's confirming the weakness in the overnight trading. Retracing some of Thursday's positive reversal day is not unusual, even if stocks do bounce back later in the day.
Additional TSP Fund Charts:
DWCPF (S-fund) had a good day on Thursday, leading the TSP funds on the upside. It closed just north of the 200-day moving average, which is good news, but it is still in the neighborhood with more resistance just overhead at the 50-day average and the neckline of the broken head and shoulders pattern.
ACWX (I-fund) was down on Thursday and lagged the other TSP funds, but it too closed near its highs of the day. The high of the day did fill in an open gap so that is somewhat concerning as that could be a resistance level without some kind of gap up open this morning. The descending channel was broken last week, so that's a plus. A holiday reversal fake out?
BND (bonds / F-fund) rallied nicely with yields down on Thursday, BND climbed back into the wedge formation, which is good news, but again, was this a pre-holiday reversal that will flip back over this week? The 200-day moving average holding as the low is a good sign, but this chart still needs a little work.
Thanks so much for reading! We'll see you back here tomorrow.
Tom Crowley
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
Questions, comments, or issues with today's commentary? We can discuss it in the Forum.
Daily Market Commentary Archives
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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.
The stock market was closed on Friday, but stocks opened sharply lower last Thursday after President Trump's address to the nation on Iran. The gap down open turned out to be the low of the day, and we saw a decent positive reversal day form with most of the major indices able to close in positive territory and at the highs of the day. Bonds were up as yields pulled back, but that could change after a stronger than expected jobs report on Friday morning.
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The positive reversal day on Thursday was very a bullish for the charts, but there is work to be done. The reversal just put the ball in the bulls' court for a minute while we all digested the long weekend's war headlines. Was the rally last week one of those pre-holiday reversals, where the larger trend resumes now after the holiday? That's very possible, but things may still be overly stretched on the downside despite last week's modest rebound.
Oil is still one of the major catalysts, and whether the price is $80, $100, or $120, typically doesn't matter as much as which direction it is going. And of course the direction is being influenced by the day to day account of the situation in Iran and the Strait or Hormuz.
That said, stocks held up well despite a big increase in the price of oil on Thursday. Oil opened higher that day, but started to fade, hence stocks opened lower but started to rebound commensurate to the drop in the price of oil. But then oil started to bounce back, but stocks were holding up rather well. The indices closed near the highs of the day, but so did oil. That was different. Here is an intraday chart of the oil ETF USO, vs. the S&P 500.
Here's the problem with that price of oil as it retests the early March highs when the Strait of Hormuz started to get blocked.
Here is a long-term chart of the price of oil vs. the S&P 500. We know that inflation and a spike in oil prices in 2022 hurt stocks, and it took a pullback in oil to eventually see the bear market finally bottom. That may be the same situation this time around, but Thursday's action was a little different. Possibly because of the holiday reversal, or maybe something is actually changing.
The 10-year Treasury Yield also reversed as it rallied early, then flipped over and closed modestly lower. It remains above key support.
A much stronger than expected jobs report was released on Friday morning and that may give yields a reason to move up again this morning. The dramatic shift from the February report to the March report is interesting, and again we have to wonder what is going on at the BLS. Can this data be accurate? A loss of 133K one month, and a gain of 178K the next? Did something change or, to use a sports referee analogy, was this some kind of a make up call?
The S&P 500 (C-fund) looked destined for a breakdown on Thursday morning as the descending trading channel was looking very much intact, until that early morning positive reversal where the index was able to break back above the channel's resistance line. It remains below the 200-day moving average, and that's the technical problem, as that resistance often holds once the chart goes below it, so we start this week at an important pivot point.
The Dow Transportation Index had a nice day on Thursday, filling an overhead open gap in the process. But as we often see, the top of a filled gap can act as resistance, so we'll just have to see if this market leader can break through.
We'll get a heavy dose of economic data this week including some manufacturing data this morning, ADP employment data on Tuesday, PCE inflation data and the GDP on Thursday, and the CPI data and Michigan Sentiment data on Friday.
The futures opened sharply lower on Sunday evening presenting the possibility that last week was a pre-holiday reversal week and this week could be the reckoning. We can't always trust the overnight futures, as we saw on Thursday, and especially on a Sunday night, but oil futures were up sharply as well, and that's confirming the weakness in the overnight trading. Retracing some of Thursday's positive reversal day is not unusual, even if stocks do bounce back later in the day.
Additional TSP Fund Charts:
DWCPF (S-fund) had a good day on Thursday, leading the TSP funds on the upside. It closed just north of the 200-day moving average, which is good news, but it is still in the neighborhood with more resistance just overhead at the 50-day average and the neckline of the broken head and shoulders pattern.
ACWX (I-fund) was down on Thursday and lagged the other TSP funds, but it too closed near its highs of the day. The high of the day did fill in an open gap so that is somewhat concerning as that could be a resistance level without some kind of gap up open this morning. The descending channel was broken last week, so that's a plus. A holiday reversal fake out?
BND (bonds / F-fund) rallied nicely with yields down on Thursday, BND climbed back into the wedge formation, which is good news, but again, was this a pre-holiday reversal that will flip back over this week? The 200-day moving average holding as the low is a good sign, but this chart still needs a little work.
Thanks so much for reading! We'll see you back here tomorrow.
Tom Crowley
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
Questions, comments, or issues with today's commentary? We can discuss it in the Forum.
Daily Market Commentary Archives
For more info our other premium services, please go here... www.tsptalk.com/premiums.php
To get weekly or daily notifications when we post new commentary, sign up HERE.
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.
