After a big start last week, stocks were a little tentative for a couple of days to end it. The Dow had rallied 950-points off of the recent lows but it experienced modest losses of 40-points on Thursday and 21-points on Friday, and it may just be a healthy pause while stocks worked off some short-term overbought conditions. Of course the other side of that story could be that we got a bear market rally, and it is now stalling. This looks like an important week for the market.
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Oil also rebounded last week but struggled when it tested the 50-day EMA.
The gains were solid for the TSP stock funds last week, but there is still a sea of red for the month of February, and for the year. Bonds have been the safety play for many investors.
The stock index futures opened modestly lower at 6 PM ET Sunday evening, as did the oil futures, but a few hours later they both reversed and moved higher.
The SPY (S&P 500 Index / C-Fund) rallied last week and broke above some important resistance in the 20-day EMA and the 2016 descending resistance line. It was not able to break above the 50-day EMA or the old support line (dashed) that may have turned into resistance. The closest open gap was nearly filled, and there is another gap down near 186.50. If we are still in a bear market environment, and I don't go by the 20% decline definition, then this should fail around here. Otherwise the rally off the double bottom will continue and that's why this week's action will be very important and telling.
The weekly chart of the S&P 500 still shows the double bottom, which is similar to the August / October double bottom, but it could also be forming a bearish head and shoulders pattern, albeit a bit lopsided.
The Dow Completion Index (small caps / S-Fund) has a couple of unfilled gaps to deal with. If the rally can resume this week, the next level of more serious resistance is probably near 920.
The Dow Transportation Index pulled back off Wednesday's high but remained above the 50-day EMA and may now be forming a bull flag. This index has been in a bear market for nearly a year and anticipating a bearish outcome has been the play over and over, so this index has a lot to prove to us before we can trust it.
The price of oil rallied from the $26 low all the way back up to $34 before running into the 50-day EMA and stalling late last week. If the bear market / downtrend continues here we should see lower prices this week. However, if we can see a technical improvement, like many of the charts we see trying to do, then perhaps we'll see a breakout here too. But when in a bear market, we should expect bearish results until the bear proves itself wrong.
The action overseas shows some of the big players hitting resistance and perhaps starting to back off again. This is the London FTSE...
And here is the German DAX...
I have been watching the Greek market as well after a scare a couple of weeks ago when the Athens Index dropped 8% in one day to new lows. It has made lower lows since but last week it bounced back. It started to rollover again on Friday potentially making a new low high. It's not a major player in the I-fund but if Greece's economy falls apart again, the rest of Europe will likely suffer.
The AGG (bonds / F-fund) stayed within it rising trading channel, and that is bullish for bonds as long as it holds.
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. We'll see you back here tomorrow.
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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Oil also rebounded last week but struggled when it tested the 50-day EMA.
The gains were solid for the TSP stock funds last week, but there is still a sea of red for the month of February, and for the year. Bonds have been the safety play for many investors.
The stock index futures opened modestly lower at 6 PM ET Sunday evening, as did the oil futures, but a few hours later they both reversed and moved higher.
The SPY (S&P 500 Index / C-Fund) rallied last week and broke above some important resistance in the 20-day EMA and the 2016 descending resistance line. It was not able to break above the 50-day EMA or the old support line (dashed) that may have turned into resistance. The closest open gap was nearly filled, and there is another gap down near 186.50. If we are still in a bear market environment, and I don't go by the 20% decline definition, then this should fail around here. Otherwise the rally off the double bottom will continue and that's why this week's action will be very important and telling.
The weekly chart of the S&P 500 still shows the double bottom, which is similar to the August / October double bottom, but it could also be forming a bearish head and shoulders pattern, albeit a bit lopsided.
The Dow Completion Index (small caps / S-Fund) has a couple of unfilled gaps to deal with. If the rally can resume this week, the next level of more serious resistance is probably near 920.
The Dow Transportation Index pulled back off Wednesday's high but remained above the 50-day EMA and may now be forming a bull flag. This index has been in a bear market for nearly a year and anticipating a bearish outcome has been the play over and over, so this index has a lot to prove to us before we can trust it.
The price of oil rallied from the $26 low all the way back up to $34 before running into the 50-day EMA and stalling late last week. If the bear market / downtrend continues here we should see lower prices this week. However, if we can see a technical improvement, like many of the charts we see trying to do, then perhaps we'll see a breakout here too. But when in a bear market, we should expect bearish results until the bear proves itself wrong.
The action overseas shows some of the big players hitting resistance and perhaps starting to back off again. This is the London FTSE...
And here is the German DAX...
I have been watching the Greek market as well after a scare a couple of weeks ago when the Athens Index dropped 8% in one day to new lows. It has made lower lows since but last week it bounced back. It started to rollover again on Friday potentially making a new low high. It's not a major player in the I-fund but if Greece's economy falls apart again, the rest of Europe will likely suffer.
The AGG (bonds / F-fund) stayed within it rising trading channel, and that is bullish for bonds as long as it holds.
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. We'll see you back here tomorrow.
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.
