It has been eight trading days since the correction low on March 13 and the S&P 500 is now up 4.8% since that low. We knew it was due, but now what? Is this a rally that needs to be sold, or did the bulls ring the bell at the bottom on the 13th? If you ask a dozen people you may get six of one answer, and a half dozen of the other. It's just that kind of market. Is today going to keep the rally going, or will Turnaround Tuesday make an appearance?
For those of you who showed up to read Monday's public commentary late Sunday or early Monday morning, I apologize. I managed to write it up during a busy weekend, but just forgot to hit that upload button. Thankfully one of our forum members asked about it just before Monday's TSP IFT deadline, so it eventually got posted - just late. Sorry! Let's hope I remember to hit send after this one is completed. 8^/ If ever the opening bell rings and there is no new commentary posted, it's a mistake so please email me at (tom at tsp talk com) and let me know. Thanks!
One of the messages I have been conveying here and in my Plus reports is that after a steep pullback hits some of those tough levels that flirt with the end of a bull market, we tend to get a snap back rally, and near the lows it is either the best time to be buying, or the correction starts to morph into a bear market.
Many people use the 200-day simple average as a gauge. That line represents the close of the prior 200 days of trading, divided by 200. Others may use the EMA average, or exponential moving average, which puts more emphasis on the more recent action. I like to use the one that seems to be working best at the time. Then there are others who look at the direction of these averages - are they currently moving up or down?
The S&P 500 (C-fund) gapped up above its 200-day EMA (blue line) on Monday morning and that kind of action can often bring a 'gap and go' situation. Gaps do tend to get filled sooner than later, but a gap and go above a major moving average can be different, and they don't always get filled right away. The reason for that is that a runaway rally triggers FOMO buying (fear of missing out) from the underinvested, and every minor dip gets bought.
Yesterday's rally did not gap up above the 200-day simple average (orange) but the market action was bullish all day pushing the index to close near the highs of the day and above that 200 day simple average, and that's a good sign. We could see some backing and filling to retest those averages, but what the bulls want to see is those averages now holding as support.
Volatility may not be over yet and the market has become driven by headlines that seem to change almost daily, so there's no guarantees. We do have a set up for perhaps more upside, but as I mentioned above it's already been a 5% move so the test of the bulls resolve may come fairly quickly.
These next three charts are very interesting as they are all very sensitive to the economy. In general, when Treasury Yields, the price of oil, and the Dow Transportation Index are falling, it is a sign of potential economic weakness. Right now they are all coming off their recent lows after a steep decline, which is basically the definition of a bear flag.
The 10-year just pushed above its 200-day average, but that is a clear bear flag in blue. Higher yields can mean economic growth - or inflation concerns.
I will lean toward the economic growth for now because of the confirmation from the WTIC oil chart and the Transportation Index, but they are also forming a bear flag so the failure watch of this rally is on.
As is, these charts do not look like they have staying power so it will be crucial to see them move above some imminent resistance in the near future, if the rebound in the stock market is going to have legs.
The Tariff Talk has been easing a bit but April 2nd is coming up quickly.
The DWCPF (S-fund) led the way yesterday and it jumped over a couple of levels of resistance. The 200-day average in blue is the next test if this rally is going to continue. It's had quite a move off the lows already so we'll see how the bears react to a test of the average, if stocks do move higher again today.
The ACWX (I-fund) was up but the rally in the dollar and the fact that US stocks were on fire, held the inflated I-fund back a little. The chart looks good, trending higher, but the double top is still in play, and that is actually an F-flag, and they often break to the downside - not up.
BND (F-fund) took a tumble on Monday as yields rallied. It was a good old fashion yields up, stocks up rally, which is typical of a bull market. When a bull market is reliant on lower yields, it means it needs help. Yesterday was different, but as I mentioned above, the 10-year yield is in a bear flag and they may come back down again anyway.
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.
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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.
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For those of you who showed up to read Monday's public commentary late Sunday or early Monday morning, I apologize. I managed to write it up during a busy weekend, but just forgot to hit that upload button. Thankfully one of our forum members asked about it just before Monday's TSP IFT deadline, so it eventually got posted - just late. Sorry! Let's hope I remember to hit send after this one is completed. 8^/ If ever the opening bell rings and there is no new commentary posted, it's a mistake so please email me at (tom at tsp talk com) and let me know. Thanks!
One of the messages I have been conveying here and in my Plus reports is that after a steep pullback hits some of those tough levels that flirt with the end of a bull market, we tend to get a snap back rally, and near the lows it is either the best time to be buying, or the correction starts to morph into a bear market.
Many people use the 200-day simple average as a gauge. That line represents the close of the prior 200 days of trading, divided by 200. Others may use the EMA average, or exponential moving average, which puts more emphasis on the more recent action. I like to use the one that seems to be working best at the time. Then there are others who look at the direction of these averages - are they currently moving up or down?
The S&P 500 (C-fund) gapped up above its 200-day EMA (blue line) on Monday morning and that kind of action can often bring a 'gap and go' situation. Gaps do tend to get filled sooner than later, but a gap and go above a major moving average can be different, and they don't always get filled right away. The reason for that is that a runaway rally triggers FOMO buying (fear of missing out) from the underinvested, and every minor dip gets bought.
Yesterday's rally did not gap up above the 200-day simple average (orange) but the market action was bullish all day pushing the index to close near the highs of the day and above that 200 day simple average, and that's a good sign. We could see some backing and filling to retest those averages, but what the bulls want to see is those averages now holding as support.
Volatility may not be over yet and the market has become driven by headlines that seem to change almost daily, so there's no guarantees. We do have a set up for perhaps more upside, but as I mentioned above it's already been a 5% move so the test of the bulls resolve may come fairly quickly.
These next three charts are very interesting as they are all very sensitive to the economy. In general, when Treasury Yields, the price of oil, and the Dow Transportation Index are falling, it is a sign of potential economic weakness. Right now they are all coming off their recent lows after a steep decline, which is basically the definition of a bear flag.
The 10-year just pushed above its 200-day average, but that is a clear bear flag in blue. Higher yields can mean economic growth - or inflation concerns.
I will lean toward the economic growth for now because of the confirmation from the WTIC oil chart and the Transportation Index, but they are also forming a bear flag so the failure watch of this rally is on.
As is, these charts do not look like they have staying power so it will be crucial to see them move above some imminent resistance in the near future, if the rebound in the stock market is going to have legs.
The Tariff Talk has been easing a bit but April 2nd is coming up quickly.
The DWCPF (S-fund) led the way yesterday and it jumped over a couple of levels of resistance. The 200-day average in blue is the next test if this rally is going to continue. It's had quite a move off the lows already so we'll see how the bears react to a test of the average, if stocks do move higher again today.
The ACWX (I-fund) was up but the rally in the dollar and the fact that US stocks were on fire, held the inflated I-fund back a little. The chart looks good, trending higher, but the double top is still in play, and that is actually an F-flag, and they often break to the downside - not up.
BND (F-fund) took a tumble on Monday as yields rallied. It was a good old fashion yields up, stocks up rally, which is typical of a bull market. When a bull market is reliant on lower yields, it means it needs help. Yesterday was different, but as I mentioned above, the 10-year yield is in a bear flag and they may come back down again anyway.
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.
