Volatility picked up last week as we had 4 days with the Dow gaining or losing triple digits, with Friday being a down 100-point day. It looks like we'll start Monday with a positive open as the futures are up about a half of a percent as I write this on Sunday night and it looks lime Greece has been given yet another deal - but what else is new?
One thing I have noticed over the years is that gap opens on Monday morning get filled quickly, but positive gaps tend to "stick" more than negative opens, so I think the bulls have an advantage to start the week. That's a bit of a surprise considering the global situation. Yes, it looks like there is a deal in Greece, which accounts for the positive move in the futures, but did you see what happened in China last week? If not you probably will. In a nutshell, China's Shanghai Index lost 13% last week, which was the worst week there in 7-years. Several years ago a correction in Chinese stocks sent our markets in a little bit of a panic, but so far there has been no reaction.
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The I fund led the stock funds on Friday, and bonds (F-fund) showed a little more concern over the global situation as it gained 0.37%, which is a big move for bonds.
The SPY (S&P500 / C-fund) remains on a clear uptrend, albeit a volatile trip to the top right hand corner of this chart. The fact that Thursday's high was higher than Friday's is a concern as we've seen several of these precede pullbacks, but perhaps the strong overnight futures will negate this potential peak. Give it a few hours and we may have our answer.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The weekly chart of the S&P 500 shows that it was able to close back in the rising long-term rising trading channel, but it hasn't been easy. Like in October and early 2015, the support has been seriously tested the last couple of weeks, but does it mean anything? Closing back above is certainly a shot in the arm for the bulls.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Dow Completion Index (S-fund) made new highs on Thursday but couldn't really follow through on Friday. It could be a double top which is normally a temporary stop sign, but with the futures rallying on Sunday night, perhaps the small caps have a breakout on their mind?
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Dow Transportation Index has been the bearish canary in the coal mine over the last few months and while it tried to rally last week, the technical damage to this chart has been severe and I think we have to assume the bears have the edge here, and normally that is not a positive sign for the broader indices, although lately that has not been the case.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The EFA (EAFE index / I-fund) posted a pretty bearish reversal day on Thursday and Friday was rather mute by comparison. It remains below the 50-day EMA and above the 200-day EMA so the bulls and bears will battle for control this week. The situation in Europe has been a burden on the I-fund, and even though China is not a part of the I-fund, it does have an impact on the other Far East markets in our I-fund.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The weakening dollar has helped the I-fund as we saw it out-perform the C and S funds on Friday, but surprisingly, not for the week.
Chart provided courtesy of www.sentimentrader.com, analysis by TSP Talk
The German DAX shows the trouble in Europe. This chart isn't completely broken yet, but the short and intermediate-term trends are not positive.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The AGG (bonds / F-fund) popped up sharply on Friday. Now that it is back above the 200-day EMA we have to give it a little more respect. A lot more than I had for it before Friday. Whenever bonds rally like this and break above resistance, you have to wonder if there's something in the air that investors are seeing that makes them want to choose the low yields in bonds over the risk in stocks. The big resistance is near 109.50 and breaking above that would be a big tell for stocks and bonds going forward.
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
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