Stocks floated modestly higher on Friday, with little push back from the bears, and after some panic selling following the release of the prior week's jobs report (in the futures market) stocks came back strong and posted gains between 1% and 1.7%% in the TSP funds last week.
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The large caps led the way on Friday while the small caps and I-fund weren't too far behind, and bonds were flat to slightly higher.
The charts look decent, as do some indicators, but as our Plus subscribers will see below, there are some big concerns in some indicators. The market loves to climb a wall of worry and seems to always move in one direction longer than seems reasonable, and it may be a matter of how long this market can go higher without these indicators having an impact. There's always something out there that we should be concerned about, but anticipating weakness could be costly.
The S&P 500 (C-fund) is in a wide pennant formation and is nearing the top of it now. It has been consolidating for some time and has moved virtually sideways since early December. It's either just too tired to breakout, or if it does, it could be explosive. The question is, with earnings expectations low and interest rates hikes on the horizon, what would be the catalyst for a breakout?
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Wilshire 4500 (S-fund) posted a small gain on Friday pushing ever so closer to another new high. The rising wedge formations we are seeing aren't encouraging, but the trend is still up.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The real small cap index, the Russell 2000, is now only a few points from new highs, and if it can breakout, perhaps the other indices will follow.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Dow Transportation Index has followed through with its rebound off of the recent lows and 200-day EMA. It's never good to see this index lag, but it does seem to be trying to come back to life. Will it have the strength to continue?
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The EFA (EAFE Index / I-fund) is also in a rising wedge with a couple of open gaps below. Perhaps it is a bullish cup and handle formation that is just slanting upward? The action is good and the question is, will it test the bottom of the wedge and fill the open gaps before attempting a breakout?
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The AGG (Bonds / F-fund) broke down from a rising trading channel last week, but a case could be made for a bull flag forming. It that's the case it could move higher with the bottom of the rising channel (dashed) now acting as resistance.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
Read more in today's TSP Talk Plus Report. We post more charts, indicators and analysis, plus discuss the Sentiment Survey Results and 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 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.
