Stocks gapped open significantly higher on Monday and never looked back as the Dow closed up 264-points, it's best gain since February 3 and was never really up less than 100-points after the opening bell. Corporate mergers and optimism that central banks will support for global growth was the reason given to the rally.
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The I-fund lagged badly gaining just 0.07% as the dollar gapped up also. Bonds (F-fund) were down.
The SPY (S&P 500 / C-fund) gapped open, and we know these gaps do tend to get filled. Most gaps get filled very quickly, some take days, some weeks, or even months. The gaps have been consistent coming off the lows as I marked with red boxes. All but one have been filled. Will this recent one be another "breakaway gap" like we had in early February that saw the market rally for weeks, or will it be one that gets filled within days like the one prior?
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Wilshire 4500 (S-fund) looks good with all the parts of this chart pointing in the right direction. As they say, if a chart starts in the bottom left hand corner and ends in the top right, you have yourself a bull market, and small caps are certainly acted as if they are in a bull market.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Dow Transportation Index is lagging, which is not generally a good sign for the overall market, but it is bouncing in the same area that eventually sent it toward new highs several times. It's below the 50-day EMA and has a lot of work to do, but it's a good start.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The EFA (EAFE Index / I-fund) did not participate the rally yesterday, at least not to the extent of the U.S. indices, and it seems to be struggling to fill the overhead gap (blue.) There is a small bear flag forming but as we talked about earlier this month, these bear flags on the EFA have led to breakouts to the upside - something a bear flag does not normally do.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The dollar's strength was a large part of the reason the I-fund lagged Monday and it looks like the pullback in the dollar has finished for now. The open gap above 26.0 is certainly a possible initial target for any relief rally.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The historical performance surrounding Easter weekend is quite positive with just one day showing a negative average return from 4 days prior to Good Friday, until 4-days after, and that would be next Monday.
Chart provided courtesy of www.sentimentrader.com, analysis by TSP Talk
The AGG (Bonds / F-fund) has now formed a bear flag after breaking down from the short-term rising trading channel. It's looking a little bearish here.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
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Thanks for reading! We'll see you back here tomorrow.
Tom Crowley
Posted daily at TSP Talk Market Commentary
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