Stocks gapped open higher on Tuesday and held onto the gains throughout the day and into the close. The Dow ended the day with a 215-point gain, and the TSP stock funds all had big days.
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The I-fund gained 1.43% while bonds were down slightly.
The SPY (S&P 500 / C-fund) gapped up and ran up toward the 50-day EMA. That will be an interesting test for the market. We expected an oversold relief rally, and we knew it could be explosive, which it was, but the 50-day EMA might be the test to see if that's all it was - a relief rally- or if the upside will resume.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
Volume has been very light which may indicate that a lot of people are still on the sidelines waiting for a pullback to get back in, and if that's the case, sometimes they can wait a long time. The question of testing the lows, which is not uncommon, would be a major setback, even if the lows do hold.
The Wilshire 4500 (S-fund) has rallied up to the 200-day EMA, which is a big test for the bull market. If we are going to end up in a bear market, the small caps could have some trouble going any higher than this double dose of resistance (August's low is the other.)
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Russell 2000 (small caps) had a big day gaining 1.63% and like the SPY, it opened higher leaving an open gap. Taking a look at prior upside gaps created in the Russell show every one getting filled within a week or two. That doesn't mean the market will collapse, but it looks like at some point in the next several days, Monday's high near 1095 could be tested again.
Chart provided courtesy of www.stockcharts.comm, analysis by TSP Talk
The Dow Transportation Index has done a very good job of recovering from the recent sell-off, but that's about a 10% rally from the lows last week. That may be a little too much, too fast, but technical analysis-wise the chart has improved greatly trading back above all three major EMAs.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The EFA (EAFE Index / I-fund) rallied as well, and it did break above its short-term resistance line. As we have been mentioning, this has a lot of room on the upside, even if the EFA remains in a bear market.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The AGG (Bonds / F-fund) was down slightly as investors are back buying stocks.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
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Thanks for reading! We'll see you back here tomorrow.
Tom Crowley
Posted daily at TSP Talk Market Commentary
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.
