Stocks were mixed again yesterday with the Dow shedding 41-points and the S&P down 2, while the small caps, the Nasdaq, and the I-fund closed slightly higher. The bombing in Brussels shook up the overnight futures but as soon as the stock markets opened, the relentless bulls pushed forward, although by the end of the day there was a slight slowdown in momentum.
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It seems that it is going to take a lot to push a market down that has strong upside momentum fueled by cheap money, thanks to Central Banks. Program trading has also had a positive impact and the fact that stocks were being bought at the open yesterday reminds us that computer programs do not have emotions like people do. In the "old" days prior to excessive program trading, the market may have sold off 1% to 2% after a geopolitical event like we saw yesterday. That said, once momentum ceases, the programs could move toward selling programs.
This will be a short week as this Friday is Good Friday and a market holiday and the TSP will be closed. There will be no reports and the TSP will not process transactions.
The DWCPF (Dow Completion Index / Small Caps) is stalling just south of the important 200-day EMA. Technical analysis doesn't work as well on an index that isn't widely traded like this one, so the fact that the rising support line broke is noteworthy, but probably not significant, although rising wedges do tend to eventually break down.
The EFA (EAFE Index / I-fund) remains in a rising channel but below the 200-day EMA. As I write this on Tuesday evening the European markets have not opened yet for Wednesday so I am curious to see how the trading goes over there. The initial reaction was a sharp sell-off but their markets rallied when U.S. markets opened on Tuesday, and closed with modest gains, but will that hold today?
The price of oil hit the 200-day EMA last Friday, and while it has been unable to get above it, there has been no real pullback. So far it has just moved sideways and stayed above $40. Support is rising sharply and being tested right now so without more upside today, that support would be violated.
The AGG (Bonds / F-fund) shows that bonds rallied up to recent highs on the Brussels bombing, but settled back down and actually filled the small open gap created last week. The top of the pennant formation (blue) should try to hold as support or else we'll have a fake-out on our hands instead of a breakout.
The yield on the 10-year Treasury Note shows 3 bearish formations which, if they break down, would be bullish for bonds and the F-fund. There is a large bear flag, a rising wedge that already broken down, and a smaller bear flag in red.
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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It seems that it is going to take a lot to push a market down that has strong upside momentum fueled by cheap money, thanks to Central Banks. Program trading has also had a positive impact and the fact that stocks were being bought at the open yesterday reminds us that computer programs do not have emotions like people do. In the "old" days prior to excessive program trading, the market may have sold off 1% to 2% after a geopolitical event like we saw yesterday. That said, once momentum ceases, the programs could move toward selling programs.
This will be a short week as this Friday is Good Friday and a market holiday and the TSP will be closed. There will be no reports and the TSP will not process transactions.
The S&P 500 / C-Fund was down slightly yesterday keeping the 2016 gain below 1%, but getting to that point took quite a massive rally that may be in need of a rest. Without a little breathing in and out in the charts, support levels are harder to come by and when they break, there is little to hold the chart up. This kind of straight up action can really frustrate investors who are underinvested and they tend to buy any little dip and that's what fuels the rally. If you have missed it, patience is probably your best course of action. Chasing rarely pays off in the end.
The DWCPF (Dow Completion Index / Small Caps) is stalling just south of the important 200-day EMA. Technical analysis doesn't work as well on an index that isn't widely traded like this one, so the fact that the rising support line broke is noteworthy, but probably not significant, although rising wedges do tend to eventually break down.
The EFA (EAFE Index / I-fund) remains in a rising channel but below the 200-day EMA. As I write this on Tuesday evening the European markets have not opened yet for Wednesday so I am curious to see how the trading goes over there. The initial reaction was a sharp sell-off but their markets rallied when U.S. markets opened on Tuesday, and closed with modest gains, but will that hold today?
The price of oil hit the 200-day EMA last Friday, and while it has been unable to get above it, there has been no real pullback. So far it has just moved sideways and stayed above $40. Support is rising sharply and being tested right now so without more upside today, that support would be violated.
The AGG (Bonds / F-fund) shows that bonds rallied up to recent highs on the Brussels bombing, but settled back down and actually filled the small open gap created last week. The top of the pennant formation (blue) should try to hold as support or else we'll have a fake-out on our hands instead of a breakout.
The yield on the 10-year Treasury Note shows 3 bearish formations which, if they break down, would be bullish for bonds and the F-fund. There is a large bear flag, a rising wedge that already broken down, and a smaller bear flag in red.
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.
