Stocks pulled back yesterday as the market digests the big gains made after Friday's big jobs report rally. The Dow shed 52-points of the 199-points it gained last Friday, but surprisingly, the small caps of the Russell 2000 have now given back all of Friday's gains.
[TABLE="width: 80%, align: center"]
[TR]
[TD="width: 300"]
[/TD]
[TD="align: center"] Daily TSP Funds Return[TABLE="width: 163"]
[TR]
[TD="width: 83, align: right"] G-Fund:[/TD]
[TD="width: 80, align: right"] +0.0063%[/TD]
[/TR]
[TR]
[TD="width: 83, align: right"] F-fund:[/TD]
[TD="width: 80, align: right"] +0.28%[/TD]
[/TR]
[TR]
[TD="width: 83, align: right"] C-fund:[/TD]
[TD="width: 80, align: right"] -0.32%[/TD]
[/TR]
[TR]
[TD="width: 83, align: right"] S-fund:[/TD]
[TD="width: 80, align: right"] -0.41%[/TD]
[/TR]
[TR]
[TD="width: 83, align: right"] I-fund:[/TD]
[TD="width: 80, align: right"] -0.15%[/TD]
[/TR]
[/TABLE]
[TABLE="width: 69%, align: center"]
[TR]
[TD="align: right"] [/TD]
[/TR]
[/TABLE]
[/TD]
[/TR]
[/TABLE]
Bonds rallied again helping the F-fund to a 0.28% gain yesterday, and we have now seen the open gaps get filled on both of the bond ETF's we follow. I will go over a few bond charts today to see if we can see what is happening there.
The S&P 500 (SPY) pulled back modestly yesterday making what may be at least a short-term double top. Plus there is a very small open gap on the SPY that may be a target for this pullback.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Russell 2000 has now lost all of the gains made during the big rally on the day of the jobs report, and it is now back testing the strong rising support line. It is running out of room so if it wants to stay in the rising trading channel, it really need to make its move in the next day or so. That 50-day EMA has also been a strong area of support on this IWM chart but the prior two tests of the 50-day EMA were above the support line.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Transportation Index may have had the worst day of all of the major indices yesterday after moving into positive territory at the open, but failing and losing 0.7% creating a negative outside reversal day. It is still above the 20-day EMA and the rising support line, but the outside day tends to lead to more downside action where that support will like be tested.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Now onto bonds. I had become bearish on bonds, particularly since we saw the ETFs fall below the neckline of the head and shoulders pattern on the 7 to 10 year bond fund (below right.) I had been saying that I would avoid the F-fund unless we see these charts move above the necklines (which they have now), and then yesterday I mentioned that once the gaps get filled, I would expect more downside. Those gaps are filled now.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Those charts above are bearish in my eyes but I decided to look at some of the longer-term charts and sentiment indicators.
This next chart goes back to 2010 and it shows that bond traders / investors are more bearish on bonds than they have been in several years. This could mean we are due for some kind of relief rally - even if the long-term picture for bonds may be bearish.
Chart provided courtesy of www.sentimentrader.com, analysis by TSP
I have another long-term bond chart for TSP Talk Plus members telling a similar story, but the caveat here is that bonds have been in a bull market for decades and many believe that bull market may be coming to an end. If that's the case then that rising support line will eventually break down, but until then, perhaps a relief rally may be in the cards.
That is a longer-term outlook. It doesn't mean bonds will rally right now, but if the negative divergences start to negatively impact the stock market, perhaps investors will start throwing money back in the bond market.
In today's TSP Talk Plus Report we look at the new highs / new lows indicator, plus another long-term bond chart. 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 TSP Talk Market Commentary
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.
[TABLE="width: 80%, align: center"]
[TR]
[TD="width: 300"]
[TD="align: center"] Daily TSP Funds Return[TABLE="width: 163"]
[TR]
[TD="width: 83, align: right"] G-Fund:[/TD]
[TD="width: 80, align: right"] +0.0063%[/TD]
[/TR]
[TR]
[TD="width: 83, align: right"] F-fund:[/TD]
[TD="width: 80, align: right"] +0.28%[/TD]
[/TR]
[TR]
[TD="width: 83, align: right"] C-fund:[/TD]
[TD="width: 80, align: right"] -0.32%[/TD]
[/TR]
[TR]
[TD="width: 83, align: right"] S-fund:[/TD]
[TD="width: 80, align: right"] -0.41%[/TD]
[/TR]
[TR]
[TD="width: 83, align: right"] I-fund:[/TD]
[TD="width: 80, align: right"] -0.15%[/TD]
[/TR]
[/TABLE]
[TABLE="width: 69%, align: center"]
[TR]
[TD="align: right"] [/TD]
[/TR]
[/TABLE]
[/TD]
[/TR]
[/TABLE]
Bonds rallied again helping the F-fund to a 0.28% gain yesterday, and we have now seen the open gaps get filled on both of the bond ETF's we follow. I will go over a few bond charts today to see if we can see what is happening there.
The S&P 500 (SPY) pulled back modestly yesterday making what may be at least a short-term double top. Plus there is a very small open gap on the SPY that may be a target for this pullback.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Russell 2000 has now lost all of the gains made during the big rally on the day of the jobs report, and it is now back testing the strong rising support line. It is running out of room so if it wants to stay in the rising trading channel, it really need to make its move in the next day or so. That 50-day EMA has also been a strong area of support on this IWM chart but the prior two tests of the 50-day EMA were above the support line.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Transportation Index may have had the worst day of all of the major indices yesterday after moving into positive territory at the open, but failing and losing 0.7% creating a negative outside reversal day. It is still above the 20-day EMA and the rising support line, but the outside day tends to lead to more downside action where that support will like be tested.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Now onto bonds. I had become bearish on bonds, particularly since we saw the ETFs fall below the neckline of the head and shoulders pattern on the 7 to 10 year bond fund (below right.) I had been saying that I would avoid the F-fund unless we see these charts move above the necklines (which they have now), and then yesterday I mentioned that once the gaps get filled, I would expect more downside. Those gaps are filled now.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Those charts above are bearish in my eyes but I decided to look at some of the longer-term charts and sentiment indicators.
This next chart goes back to 2010 and it shows that bond traders / investors are more bearish on bonds than they have been in several years. This could mean we are due for some kind of relief rally - even if the long-term picture for bonds may be bearish.
Chart provided courtesy of www.sentimentrader.com, analysis by TSP
I have another long-term bond chart for TSP Talk Plus members telling a similar story, but the caveat here is that bonds have been in a bull market for decades and many believe that bull market may be coming to an end. If that's the case then that rising support line will eventually break down, but until then, perhaps a relief rally may be in the cards.
That is a longer-term outlook. It doesn't mean bonds will rally right now, but if the negative divergences start to negatively impact the stock market, perhaps investors will start throwing money back in the bond market.
In today's TSP Talk Plus Report we look at the new highs / new lows indicator, plus another long-term bond chart. 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 TSP Talk Market Commentary
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.
