A disappointing last hour of trading spoiled the Dow and S&P 500's chances for a 4th straight positive day, following last Thursday's eye opening sell-off. The Dow lost 170-points on very light trading volume. The Nasdaq managed to close higher again, but a late slide took away some much larger gains into the close. Small caps lagged badly, and that high beta index continues to swing wildly.
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Either investors have a short memory or they were using the recent rally as a reason to take some decent profits from the prior rally after last Thursday's 1800-point sell-off. We had such decent news on Tuesday with retail sales, successful coronavirus treatment trials, and the infrastructure talk. Fast forward a day and we saw some profit taking in many indices, and in the case of small caps, the selling was more than a little profit taking.
The indices looked a little tired yesterday, but that has been the case for several weeks after they moved up 30% off their lows. But they've just taken two or three days off and continued higher. Is that what yesterday's dip started, or is this one different?
Failure to make a higher high over last week's highs could be a sign of a heavy market so how it bounces back from this dip, give it another day or two, could tell us a lot. But after the ferocity of last Thursday's sell off, maybe the bulls can't afford to be patient?
The S&P 500 (C-fund) seems to be repeating a daily pattern recently. Except for this past Monday, over the last week or so we've see a rally to start the day, followed by some quick profit taking. Another midday push higher into the latter part of the day, then a weak close. Probably not the best pattern to be in but the results still put the index a stone's throw from a four month high. It probably needs to overtake those highs soon or the bears will be chomping at the bit for another chance to do what it did last Thursday. It still needs to fill that open gap, and I'm surprised it didn't happen in the last two days when it was so close, and that's not good.
The DWCPF (S-fund) fell sharply late yesterday after spending much of the day with a very modest loss. The small caps have been movers lately, with big swings in both directions, making it tough to be in them, or out of them, depending on the direction that day. This one has filled its open gap and that 1450 area could be a little stubborn resistance.
The Nasdaq 100 big tech stock fund was flying early, moving above 10,000 again, before selling off late and closing with a modest gain. That failed breakout sticks out like a sore thumb, and it is still pressing the top of that rising channel so in the short term there is more room on the downside, although the channel is rising.
The EFA (I-fund) was up on the day and the late selling in U.S. stocks may have given the I-fund a temporary reprieve. The open gap here hasn't been filled yet and for the last two days the EFA has struggled to get back above the 200-day SMA.
The Dow Transportation Index was down a bit yesterday after stalling again at the 200-day EMA. The gap was filled so the bears had some ammunition, so the bulls held up rather well here for now.
The Volatility Index was surprisingly lower yesterday, although still elevated in the 30's. I would have guessed that the late spike lower in stocks yesterday might have sent this higher.
The yield on the 10-year Treasury was down and the 50-day EMA held again after Tuesday's big rally in yields. The 50-day EMA hasn't been a major factor here recently, so it may be nothing, but the lower yields did help the bonds and the F-fund yesterday.
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
For more info our other premium services, please go here... www.tsptalk.com/premiums.html
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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Either investors have a short memory or they were using the recent rally as a reason to take some decent profits from the prior rally after last Thursday's 1800-point sell-off. We had such decent news on Tuesday with retail sales, successful coronavirus treatment trials, and the infrastructure talk. Fast forward a day and we saw some profit taking in many indices, and in the case of small caps, the selling was more than a little profit taking.
The indices looked a little tired yesterday, but that has been the case for several weeks after they moved up 30% off their lows. But they've just taken two or three days off and continued higher. Is that what yesterday's dip started, or is this one different?
Failure to make a higher high over last week's highs could be a sign of a heavy market so how it bounces back from this dip, give it another day or two, could tell us a lot. But after the ferocity of last Thursday's sell off, maybe the bulls can't afford to be patient?
The S&P 500 (C-fund) seems to be repeating a daily pattern recently. Except for this past Monday, over the last week or so we've see a rally to start the day, followed by some quick profit taking. Another midday push higher into the latter part of the day, then a weak close. Probably not the best pattern to be in but the results still put the index a stone's throw from a four month high. It probably needs to overtake those highs soon or the bears will be chomping at the bit for another chance to do what it did last Thursday. It still needs to fill that open gap, and I'm surprised it didn't happen in the last two days when it was so close, and that's not good.
The DWCPF (S-fund) fell sharply late yesterday after spending much of the day with a very modest loss. The small caps have been movers lately, with big swings in both directions, making it tough to be in them, or out of them, depending on the direction that day. This one has filled its open gap and that 1450 area could be a little stubborn resistance.
The Nasdaq 100 big tech stock fund was flying early, moving above 10,000 again, before selling off late and closing with a modest gain. That failed breakout sticks out like a sore thumb, and it is still pressing the top of that rising channel so in the short term there is more room on the downside, although the channel is rising.
The EFA (I-fund) was up on the day and the late selling in U.S. stocks may have given the I-fund a temporary reprieve. The open gap here hasn't been filled yet and for the last two days the EFA has struggled to get back above the 200-day SMA.
The Dow Transportation Index was down a bit yesterday after stalling again at the 200-day EMA. The gap was filled so the bears had some ammunition, so the bulls held up rather well here for now.
The Volatility Index was surprisingly lower yesterday, although still elevated in the 30's. I would have guessed that the late spike lower in stocks yesterday might have sent this higher.
The yield on the 10-year Treasury was down and the 50-day EMA held again after Tuesday's big rally in yields. The 50-day EMA hasn't been a major factor here recently, so it may be nothing, but the lower yields did help the bonds and the F-fund yesterday.
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
For more info our other premium services, please go here... www.tsptalk.com/premiums.html
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.
