Stocks opened higher on Monday, following through on Friday's jobs report triggered rally. The Dow gained 80-points on the day. There was reason to expect some profit taking today so the gains were encouraging for the bulls, but there was some late selling that took the indices off their highs and that could mean some short-term weakness ahead, but that could be as short as intraday today.
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The Dow gained about 1200 points from Brexit lows to yesterday's highs, and that was in about 9+ trading days so there are probably many itching to take profits. That late selling may have set up a possible reversal pattern, but it was so minor that it may only indicate brief, temporary selling that could easily be bought. There seem to be many folks who don't trust the rally and that translates into underinvestment. The underinvested are looking for one thing in this market - a little weakness that they can buy. That means any dips could be shallow and brief.
Earnings season kicked off with a solid report from Alcoa after the close beating estimates handily.
The SPY (S&P 500 / C-Fund) made another new high yesterday and remained above the old high for a second straight day. Long time readers of TSP Talk know that we like to see at least a 3 day close above breakout levels before we get confirmation. If there is a pullback, there could be buyers lying in wait for an opportunity to buy, and that means the old breakout point could act as support, so look for 212.50 down to 211 for possible support. If those break, all bets are ff.
Just for giggles, let's look at the SPY if we take out the 4 bars that made up the two big down days, and the two big rebound days - as if Brexit never happened. Looks pretty good, huh?
If you believe the Brexit sell-off was just an emotion move that took the market by surprise, then the market does look pretty good. If you think the Brexit will come back to haunt the global economy, then maybe this chart is misleading.
The weekly chart shows that the S&P 500 index (not the SPY) did make a new all-time high for the first time since May of 2015.
The DWCPF (S-fund) nearly hit a new high but we could have a possible double top forming. Double tops are a common formation, but any pullback does not have to last very long and, as we saw in early June, it can make new highs without a double top pullback first.
The Nasdaq 100 (QQQ) actually poked its head into positive territory for the year, but it didn't last long as it closed just below the 2015 closing price. In April that marked a high but the full pattern resembles a cup and handle formation so I wouldn't be surprised if it does breakout soon.
The Transportation Index hit the 200-day EMA and backed off, which is common for a first time test. What happens the rest of the week will be key, and with the descending trading channel, the bears have the upper hand here.
The EFA (I-fund) filled an open gap yesterday (blue) and opened another. The good news is, it closed back above the 50-day EMA for the first time since before the Brexit sell-off.
The AGG (Bonds / F-fund) finally pulled back a bit and that's what we'd expect with stocks rising and bonds being over extended to the upside. I'd look for a pullback here toward 112.50 at a minimum to fill one gap and test the old resistance line.
Administrative Note: The TSP Talk British Open Golf Tournament Contest is starting this week. Go here for more information!
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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The Dow gained about 1200 points from Brexit lows to yesterday's highs, and that was in about 9+ trading days so there are probably many itching to take profits. That late selling may have set up a possible reversal pattern, but it was so minor that it may only indicate brief, temporary selling that could easily be bought. There seem to be many folks who don't trust the rally and that translates into underinvestment. The underinvested are looking for one thing in this market - a little weakness that they can buy. That means any dips could be shallow and brief.
Earnings season kicked off with a solid report from Alcoa after the close beating estimates handily.
The SPY (S&P 500 / C-Fund) made another new high yesterday and remained above the old high for a second straight day. Long time readers of TSP Talk know that we like to see at least a 3 day close above breakout levels before we get confirmation. If there is a pullback, there could be buyers lying in wait for an opportunity to buy, and that means the old breakout point could act as support, so look for 212.50 down to 211 for possible support. If those break, all bets are ff.
Just for giggles, let's look at the SPY if we take out the 4 bars that made up the two big down days, and the two big rebound days - as if Brexit never happened. Looks pretty good, huh?
If you believe the Brexit sell-off was just an emotion move that took the market by surprise, then the market does look pretty good. If you think the Brexit will come back to haunt the global economy, then maybe this chart is misleading.
The weekly chart shows that the S&P 500 index (not the SPY) did make a new all-time high for the first time since May of 2015.
The DWCPF (S-fund) nearly hit a new high but we could have a possible double top forming. Double tops are a common formation, but any pullback does not have to last very long and, as we saw in early June, it can make new highs without a double top pullback first.
The Nasdaq 100 (QQQ) actually poked its head into positive territory for the year, but it didn't last long as it closed just below the 2015 closing price. In April that marked a high but the full pattern resembles a cup and handle formation so I wouldn't be surprised if it does breakout soon.
The Transportation Index hit the 200-day EMA and backed off, which is common for a first time test. What happens the rest of the week will be key, and with the descending trading channel, the bears have the upper hand here.
The EFA (I-fund) filled an open gap yesterday (blue) and opened another. The good news is, it closed back above the 50-day EMA for the first time since before the Brexit sell-off.
The AGG (Bonds / F-fund) finally pulled back a bit and that's what we'd expect with stocks rising and bonds being over extended to the upside. I'd look for a pullback here toward 112.50 at a minimum to fill one gap and test the old resistance line.
Administrative Note: The TSP Talk British Open Golf Tournament Contest is starting this week. Go here for more information!
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.
