The back and forth action continued with a down day on Thursday and now that the holiday and positive seasonality is behind us, the bears are showing a little more fortitude. The Dow lost 158-points on the day, or -0.74%, while the S&P, Nasdaq, and small caps all saw larger percentage losses.
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As you'll see below, the S&P 500 and the small caps both closed near their 50-day EMAs while the beleaguered Nasdaq 100 closed below the important 50-EMA for a 5th straight day and 6 of the last 7.
We get the June Jobs Report this morning (Friday) and estimates are looking for a gain of 173,000 jobs for the month, and an unemployment rate of 4.3%. The jobs report normally has the ability to turn the market around or send it reeling, but in recent months the market hasn't been as concerned with this data. So what's the focus?
Rising global bond yields seem to be it right now and we may be seeing a reaction to Central Banks around the globe not being as accommodative as they have been over the last 8 years, and that could be the difference this time.
It may be too early to make that call, but if you remember the "Taper Tantrum" of 2013, it took 4 months before the market worked through it, so if stocks don't bounce right back here, we could see the evidence that this pullback is different this time.
The SPY (S&P 500 / C-fund) tested and held at the 50-day EMA for the second time in a week. If the leading Nasdaq Index is any indication, this could eventually break down here. But as you will see below the other major market leader, the Dow Tranports, are not in the same technical trouble so it may be a battle for the S&P to decide which leader to follow.
The DWCPF (S-fund) sold off and closed below the 50-day EMA for the first time since mid-May. Buying a day or two after this chart initially closed below the 50-day for the EMA worked every time since the election. Will it be different this time?
The Nasdaq 100 has been falling but it has been relatively orderly, meaning it continues to trade within its short-term support / resistance, and we might be seeing a bullish falling wedge forming. The question is whether it can bounce off that support to end this downturn, or if it will need some kind of volatile capitulation on the downside before the lows are made.
The Dow Transportation Index has started to pullback from that double top formation that we have been watching. A move down to 9500 would be a nice place for a pullback, where rising support meets the 20-day EMA, but then the 50-day EMA is also a clean landing zone and that would obviously be a more significant pullback.
The EFA (EAFE Index / I-fund) pulled back and is nearing a double dose of support where the 50-day EMA intersects with the June low.
The energy sector ran into that 50-day EMA and the top of the descending trading channel on Monday and has since reversed down. Trends can last a lot longer than seems reasonable.
The AGG (bonds / F-fund) was down again, which is interesting because investors tend to move toward bonds when looking for safety when stocks are falling, but instead it seems the market is more concerned with rising yields instead because of the Central Banks being less accommodative. The yield on the 10-year Treasury hit an 8-week high yesterday.
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. Have a great weekend!
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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We get the June Jobs Report this morning (Friday) and estimates are looking for a gain of 173,000 jobs for the month, and an unemployment rate of 4.3%. The jobs report normally has the ability to turn the market around or send it reeling, but in recent months the market hasn't been as concerned with this data. So what's the focus?
Rising global bond yields seem to be it right now and we may be seeing a reaction to Central Banks around the globe not being as accommodative as they have been over the last 8 years, and that could be the difference this time.
It may be too early to make that call, but if you remember the "Taper Tantrum" of 2013, it took 4 months before the market worked through it, so if stocks don't bounce right back here, we could see the evidence that this pullback is different this time.
The SPY (S&P 500 / C-fund) tested and held at the 50-day EMA for the second time in a week. If the leading Nasdaq Index is any indication, this could eventually break down here. But as you will see below the other major market leader, the Dow Tranports, are not in the same technical trouble so it may be a battle for the S&P to decide which leader to follow.
The DWCPF (S-fund) sold off and closed below the 50-day EMA for the first time since mid-May. Buying a day or two after this chart initially closed below the 50-day for the EMA worked every time since the election. Will it be different this time?
The Nasdaq 100 has been falling but it has been relatively orderly, meaning it continues to trade within its short-term support / resistance, and we might be seeing a bullish falling wedge forming. The question is whether it can bounce off that support to end this downturn, or if it will need some kind of volatile capitulation on the downside before the lows are made.
The Dow Transportation Index has started to pullback from that double top formation that we have been watching. A move down to 9500 would be a nice place for a pullback, where rising support meets the 20-day EMA, but then the 50-day EMA is also a clean landing zone and that would obviously be a more significant pullback.
The EFA (EAFE Index / I-fund) pulled back and is nearing a double dose of support where the 50-day EMA intersects with the June low.
The energy sector ran into that 50-day EMA and the top of the descending trading channel on Monday and has since reversed down. Trends can last a lot longer than seems reasonable.
The AGG (bonds / F-fund) was down again, which is interesting because investors tend to move toward bonds when looking for safety when stocks are falling, but instead it seems the market is more concerned with rising yields instead because of the Central Banks being less accommodative. The yield on the 10-year Treasury hit an 8-week high yesterday.
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. Have a great weekend!
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.
