For the second day in a row the stock market indices were stalling near the old broken support area, after a strong rally off the lows. There's a little more room on the upside before the actual resistance levels will be hit, but the pause is certainly a sign that the bulls have cooled off their buying. The I-fund led yesterday, holding onto early gains, while US stocks slipped and bond yields fell again helping the F-fund to a gain.
The stock market seems to be at an important pivot point as the rally off the lows stalls near the broken support area. The S&P 500 (C-fund) has been having trouble holding above the 5400 area, which it needs to do in order to break through resistance which starts near 5500. There's a good argument for the 5550 to 5650 area to get tested on the upside, but to get there, it has some work to do in the immediate area.
The PMO Indicator is getting close to recapturing its moving average. Typically a cross above the average is a good sign for the intermediate term, but it often happens when after a strong rally and the market becomes overbought in the short-term. That would tend to lead to at least a modest pullback before resuming higher again.
The bad news is, the "death cross" also recently occurred as you see below in the purple circle. That's the 50-day EMA falling below the 200-day average. Typically this happens after a prolonged decline and the crossover often precedes a short-term over sold bounce. The problem, we've already had a bounce so with the PMO indicator crossover, the rebound after a death cross already occurring, and the overhead resistance, can stocks move up any further?
It looks tough in the short term but even another test of the lows wouldn't hurt the long-term trend. The S&P 500 weekly chart above shows the index has fallen down to both its rising trend channel off some major market lows over the last 5+ years, as well as the prior major peak and breakout area, and both are legitimate long term support areas.
So will the S&P 500 lose some steam and retest the lows? Very possibly. If you think more short-term there is a possibility of a 500 point decline to test the lows, but long-term there's a pretty good chance that the bottom is in. After that the next level of support would be the 200-week moving average, which is 700 points below yesterday's close.
Here is the S&P 500 Equal Weight Index - same 500 stocks as the S&P 500 chart above, but the larger companies are weighted equally with the small companies. It too shows some heavy resistance as it makes its way up to the neckline of that broken head and shoulders pattern. Technically, the H&S pattern may have completed hitting its downside target so now it's just a matter of whether that resistance will hold on the way back up.
The 10-year Treasury Yield was down again yesterday as it has given back some of last week's gains, but that move from 3.9% to 4.6% shook up a lot of investors and they are getting a little more concerned. The key now is the test of the 4.3% area which has a lot of support. The F-fund moves counter to yields so if you're in the F-fund you want to see this chart break down below 4.3%.
There was some Nvidia news after the bell last night pushing the overnight futures lower, but we've seen this before and it doesn't mean too much about how today will close, but stocks could start out a little heavy today.
From tsp.gov: Holiday Closing
"Some financial markets will be closed on Friday, April 18, in observance of Good Friday. Consequently, the Thrift Savings Plan will not be updating share prices in any of the TSP funds for that day. Transactions that would have been processed Friday night (April 18) will be processed Monday night (April 21) at Monday's closing share prices."
DWCPF (S-fund) is like the C and I-funds in that it has run up to key resistance, and now the bulls and bears will battle it out to see who has the juice to make the next move. I would say the bears have the advantage as long as this remains below the resistance that is piling up. And even if the bulls can breakthrough to above 2000 and fill the open gap as high as 2100, there is even more resistance above that. However, a move to 2100 is still a big gain if it can keep this relief rally going.
ACWX (I-fund) is also right at a confluence of resistance, so the story is the same as the C and S-funds. The dollar was up yesterday but it is still sluggishly holding near the recent lows, which helps the I-fund.
BND (F-fund) hit resistance at the 50-day EMA, just as the the 10-year yield hit support at its 50-day EMA. If one goes, so will the other - that is basically it. Should yields go higher or lower, I don't know, but something is going to have to give in both of those charts.
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
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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 may use additional methods and strategies to determine fund positions.
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The stock market seems to be at an important pivot point as the rally off the lows stalls near the broken support area. The S&P 500 (C-fund) has been having trouble holding above the 5400 area, which it needs to do in order to break through resistance which starts near 5500. There's a good argument for the 5550 to 5650 area to get tested on the upside, but to get there, it has some work to do in the immediate area.
The PMO Indicator is getting close to recapturing its moving average. Typically a cross above the average is a good sign for the intermediate term, but it often happens when after a strong rally and the market becomes overbought in the short-term. That would tend to lead to at least a modest pullback before resuming higher again.
The bad news is, the "death cross" also recently occurred as you see below in the purple circle. That's the 50-day EMA falling below the 200-day average. Typically this happens after a prolonged decline and the crossover often precedes a short-term over sold bounce. The problem, we've already had a bounce so with the PMO indicator crossover, the rebound after a death cross already occurring, and the overhead resistance, can stocks move up any further?
It looks tough in the short term but even another test of the lows wouldn't hurt the long-term trend. The S&P 500 weekly chart above shows the index has fallen down to both its rising trend channel off some major market lows over the last 5+ years, as well as the prior major peak and breakout area, and both are legitimate long term support areas.
So will the S&P 500 lose some steam and retest the lows? Very possibly. If you think more short-term there is a possibility of a 500 point decline to test the lows, but long-term there's a pretty good chance that the bottom is in. After that the next level of support would be the 200-week moving average, which is 700 points below yesterday's close.
Here is the S&P 500 Equal Weight Index - same 500 stocks as the S&P 500 chart above, but the larger companies are weighted equally with the small companies. It too shows some heavy resistance as it makes its way up to the neckline of that broken head and shoulders pattern. Technically, the H&S pattern may have completed hitting its downside target so now it's just a matter of whether that resistance will hold on the way back up.
The 10-year Treasury Yield was down again yesterday as it has given back some of last week's gains, but that move from 3.9% to 4.6% shook up a lot of investors and they are getting a little more concerned. The key now is the test of the 4.3% area which has a lot of support. The F-fund moves counter to yields so if you're in the F-fund you want to see this chart break down below 4.3%.
There was some Nvidia news after the bell last night pushing the overnight futures lower, but we've seen this before and it doesn't mean too much about how today will close, but stocks could start out a little heavy today.
From tsp.gov: Holiday Closing
"Some financial markets will be closed on Friday, April 18, in observance of Good Friday. Consequently, the Thrift Savings Plan will not be updating share prices in any of the TSP funds for that day. Transactions that would have been processed Friday night (April 18) will be processed Monday night (April 21) at Monday's closing share prices."
DWCPF (S-fund) is like the C and I-funds in that it has run up to key resistance, and now the bulls and bears will battle it out to see who has the juice to make the next move. I would say the bears have the advantage as long as this remains below the resistance that is piling up. And even if the bulls can breakthrough to above 2000 and fill the open gap as high as 2100, there is even more resistance above that. However, a move to 2100 is still a big gain if it can keep this relief rally going.
ACWX (I-fund) is also right at a confluence of resistance, so the story is the same as the C and S-funds. The dollar was up yesterday but it is still sluggishly holding near the recent lows, which helps the I-fund.
BND (F-fund) hit resistance at the 50-day EMA, just as the the 10-year yield hit support at its 50-day EMA. If one goes, so will the other - that is basically it. Should yields go higher or lower, I don't know, but something is going to have to give in both of those charts.
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 may use additional methods and strategies to determine fund positions.
