Stocks rallied early on Friday as the market anticipated Janet Yellen's address in Jackson Hole, but she didn't deliver anything too note worthy and it led to some selling late as we headed into the weekend. The Dow ended the day up 30-points, about 100-points off the morning highs. Small caps and the I-fund outperformed as the dollar was hit pretty hard on Friday, while the Nasdaq lagged and posted a small loss.
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Our thoughts and prayers go out to those living in the affected areas of the storm!
The August Jobs Report gets released this coming Friday and consensus estimates are looking for a gain of about 185,000 jobs and an unemployment rate of 4.3%.
The SPY (S&P 500 / C-fund) was up nicely early on Friday, but things faded as we got closer to the closing bell. The impending hurricane certainly had its influence there, plus the media and the market are still hanging on every word out of Washington, and heading into a weekend some thought it prudent to step aside late on Friday. The chart remains in a short-term downtrend since peaking earlier in August but it is precariously still just above the important 50-day EMA and that means this is still a pullback in a bull market. But, it needs to start picking up the pace or that can change.
The longer-term view shows the SPY still above support, and it got a decent bounce off of it last week. As you see at other lows, support and / or the 50-day EMA held so again, things have to keep moving forward or this can all change.
The DWCPF (small caps / S-fund) has been hit pretty hard since it peaked in July but it has since rallied nicely, actually leading over the last of week or so. But now it is starting to hit those moving averages, and if the downtrend is going to continue, the bears could start putting the pressure back on. We'll see if the bulls have any fight left in them.
The Dow Transportation Index had a big day on Friday despite closing off the day's high, but even with that gain, the chart is not in the best position and any upside may be limited. I would say that the 9300 area will be the key over the next week or two.
The EFA (EAFE Index / I-fund) had a nice day on Friday gaining 0.60%, although the TSP only gave the I-fund 0.43% and a lot of that had to do with the dollar falling very late on Friday so the TSP did not take that into consideration.
The dollar broke down from another bear flag on Friday and it starts the new week testing the recent lows.
The price and chart of copper continue to improve and as we've talked about before, this tends to be a good sign for the economy, since a higher demand for copper usually mean things are being built. The weak dollar helped it of course, as it has with the price of gold and other commodities, although the price oil, another economically sensitive indicator, has not been on the same page, which could be a concern, but the word on the street is that oil is down because of a global glut in supply.
August is a fairly weak month for stocks historically, but September is the worst. The early part of the month is OK, and actually around the holiday it is fairy positive, but you can see in the chart that the end of the month has been just awful over the last 30 years.
Chart provided courtesy of www.sentimentrader.com
The AGG (Bonds / F-fund) continues to remain buoyant as yields slip lower and the weak dollar is certainly playing a role. The trend is up but there is resistance near 110.20.
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Thanks for reading. We'll see you back here tomorrow.
Tom Crowley
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