Stocks rallied sharply yesterday as the sellers just never showed up, particularly after the Philly Fed report came in much weaker than expected showing that bad economic news is still good news for the stock market. The Dow gained 109-points, while small caps led the way with a big day.
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[TD="align: center"] Daily TSP Funds Return[TABLE="width: 163"]
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[TD="width: 83, align: right"] G-Fund:[/TD]
[TD="width: 80, align: right"] +0.0056%[/TD]
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[TD="width: 80, align: right"] +0.06%[/TD]
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[TD="width: 80, align: right"] +0.82%[/TD]
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[TD="width: 83, align: right"] S-fund:[/TD]
[TD="width: 80, align: right"] +1.44%[/TD]
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[TD="width: 83, align: right"] I-fund:[/TD]
[TD="width: 80, align: right"] -0.30%[/TD]
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The Philadelphia Fed’s Business Outlook dropped to 6.5 from 19.8 in October. Consensus estimates were looking for a reading of 11.9 and this miss seemed to ignite buying on Wall Street. Bad economic data equals continued QE.
The on again, off again, taper talk continued yesterday with taper closer to be off right now. On Wednesday, taper was on. Who knows what's next, but we have to play the game since we're in it.
The S&P 500 (SPY) is also playing a game; the rising wedge game. Yesterday's 0.8% gain kept it right in that ever narrowing wedge formation. Clearly it will have to break one way or the other very soon but should it stay in the wedge a little longer, there is slightly more room to the upside than the down.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Dow Jones Industrial Average made a new closing high yesterday, closing above 16,000 for the first time. The 16,000 level has been hit 4 times and so far it has been a bit of a road block. Perhaps it will be an emotional resistance area after the initial relief of finally closing above it. That theory could easily be proven wrong today if the market is up again.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The small caps had a big day on Thursday with the Russell 2000 picking up 1.8%, while the S-fund (a small and mid-cap fund) added 1.44%. This small cap ETF, which had been lagging, is now testing the highs again so we'll find if a breakout is in order, or if this 111 area is going to continue to be resistance.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
I thought it was interesting that the dollar, which was up strongly on Wednesday when stocks were down and the Fed was talking tapering QE, barely moved when the taper talk was backed off on Thursday. Stocks reversed, but the dollar did not. It's interesting because the dollar would be greatly affected by a change to QE, so why it moved strongly on the taper talk on Wednesday, but did not react to the "no taper" talk on Thursday, could potentially mean stocks overreacted either on Wednesday or Thursday. But which was it?
Chart provided courtesy of www.sentimentrader.com, analysis by TSP Talk
Bonds opened lower on Thursday but rebounded on that Philly Fed number. The longer-term bond below (TLT) bounced up to the old support line but may find some resistance there now. The 7 to 10 year fund is trying to pull off a double bottom near 101.0.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
You can see how yields reversed yesterday and put in a possible short-term direction changing reversal day.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The 30-year yield nearly hit the rising resistance line so that looks like a place where it could reverse down. The yield trends are still up (as bond prices fall) but we could see a temporary pullback.
In today's TSP Talk Plus Report we talk about the sentiment surveys results from 3 different source. 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 TSP Talk Market Commentary
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