Stocks were mixed on Friday, the end of an expiration week that saw a spike in volume, which is typical and not necessarily an indication of a capitulation type of reversal, but it certainly is a cleansing as we enter the the final couple of weeks of the second quarter of this bear market year. The Dow dropped 38-points on Friday while the S&P was up modestly, and the Nasdaq and small caps led with impressive gains as investors favored the more aggressive and beaten down indices. The Dow, S&P, and Nasdaq have been down in 10 of the last 11 weeks, which had never happened before.
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Yesterday was a holiday and the stock market was closed, but the futures market was not and there was some buying going on so it looks like there is a good chance that we will start the new week with a bullish bias, as as we have seen in this environment, there is no guarantees that this strength will hold into Tuesday's opening bell. Those gains represent about a 1% gains in the futures.
Last week was an expiration week and historically they have a bullish bias as large position holders try to push the indices toward prices that will benefit their stock and index options and / or futures contracts the most, and then the following week there tends to be a bit of an unwinding of that. This year, being in the middle of a bear market, the push seems to be on the downside so perhaps the unwinding will be an rally, which is the opposite of historic norms.
I will start this new shortened week with a more broader view of what is and has been happening this year. This is the weekly chart of the S&P 500. The 200-week moving average was tested on Friday and held for now, and that is actually not unusual. Back in 2020 the COVID crash was an exception as it fell right through that average although the low was made the following week, after another weekly melt down.
If we go back further you can see that the 200-week average did tend to be a good place to start buying, but the 2008-2009 bear market was a big exception, and unlike the COVID crash, it was a profound breakdown from the average that lasted many months. There's no bell being rung at the lows but at least nibbling near the 200-week was not bad idea.
Now let's move onto the monthly charts where it is the 50-month moving average that seems to have significance. The S&P 500 came within about 60-points of that average on Friday so it's getting close. Again in this situation it was the 2008 bear market and the 2000 dot com bear market that bucked the trend of the average acting as support, but if you look closely you can see that in both 2001 and 2008, when the 50-month average was initially tested, there was a small rebound before it eventually rolled over and broke below. In 2020 the COVID crash bottomed right near that 50-month average.
Going back to the late 1980's, the 1987 market crash bottomed at the 50-month moving average as well, and did so again during the 1990-1991 recessionary period.
Connecting the lows of the 1987 market crash and the 2008 bear market, it forms a parallel trading channel connecting the dot com bubble peak and the peak from this past January.
So, there's a precedence that there could some relief at the moving averages mentioned above, but on a more dire note, if that 50-month moving average breaks and the bottom of that large red trading channel is of any consequence to this market, we could have some dark months ahead. Chances are we will not have to deal with an S&P 500 near 1500, but never say never.
With the latest Fed meeting behind us, and the next monthly jobs report, CPI report, and earnings season not due until July, we have a couple of weeks with not much going on. As I mentioned above this week is historically a week of unwinding of a bullish expiration week, but we didn't have a bullish expiration week so maybe the bulls have a small window of opportunity for a couple of quiet weeks to make something happen in this bear market.
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Admin Notes:
Here's the link to the discussions regarding the new TSP.gov website: https://www.tsptalk.com/mb/tsp-talk-news-etc-/
And here is a list of known issues on tsp.gov: https://www.tsp.gov/new-tsp-features/known-issues/
The S&P 500 (C-fund) was up slightly on a high volume expiration Friday. The index is trying to hold near the bottom of its May / June trading channel. It's not a pretty looking picture but if that support can hold, there is a lot of room overhead with two major open gaps above that could be upside targets if the bulls can ever get something going.
DWCPF (S-fund) is also flirting with support and there are basically three outcomes that are most probable. We could see a bounce off support toward the upper end of the channel in an effort to fill the open gaps. We could see a breakdown below support which probably would trigger an "I give up" kind of a capitulation. Or third it could grind sideways to work off some oversold conditions while the prior low and the bottom of the lower open gap acts as resistance.
The EFA (I-fund) fell below support last week as the rising dollar was a big headwind. Getting back above 62 could be troublesome, but being so oversold and having those large open gaps above, the chances of some kind of bounce during the coming weeks look as promising as you can expect in a bear market, which is tentative.
BND (bonds / F-fund) was up slightly on Friday but the technical picture here continues to favor the downside, particularly if that overhead open gap gets filled.
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
To get weekly or daily notifications when we post new commentary, sign up HERE.
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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Yesterday was a holiday and the stock market was closed, but the futures market was not and there was some buying going on so it looks like there is a good chance that we will start the new week with a bullish bias, as as we have seen in this environment, there is no guarantees that this strength will hold into Tuesday's opening bell. Those gains represent about a 1% gains in the futures.
Last week was an expiration week and historically they have a bullish bias as large position holders try to push the indices toward prices that will benefit their stock and index options and / or futures contracts the most, and then the following week there tends to be a bit of an unwinding of that. This year, being in the middle of a bear market, the push seems to be on the downside so perhaps the unwinding will be an rally, which is the opposite of historic norms.
I will start this new shortened week with a more broader view of what is and has been happening this year. This is the weekly chart of the S&P 500. The 200-week moving average was tested on Friday and held for now, and that is actually not unusual. Back in 2020 the COVID crash was an exception as it fell right through that average although the low was made the following week, after another weekly melt down.
If we go back further you can see that the 200-week average did tend to be a good place to start buying, but the 2008-2009 bear market was a big exception, and unlike the COVID crash, it was a profound breakdown from the average that lasted many months. There's no bell being rung at the lows but at least nibbling near the 200-week was not bad idea.
Now let's move onto the monthly charts where it is the 50-month moving average that seems to have significance. The S&P 500 came within about 60-points of that average on Friday so it's getting close. Again in this situation it was the 2008 bear market and the 2000 dot com bear market that bucked the trend of the average acting as support, but if you look closely you can see that in both 2001 and 2008, when the 50-month average was initially tested, there was a small rebound before it eventually rolled over and broke below. In 2020 the COVID crash bottomed right near that 50-month average.
Going back to the late 1980's, the 1987 market crash bottomed at the 50-month moving average as well, and did so again during the 1990-1991 recessionary period.
Connecting the lows of the 1987 market crash and the 2008 bear market, it forms a parallel trading channel connecting the dot com bubble peak and the peak from this past January.
So, there's a precedence that there could some relief at the moving averages mentioned above, but on a more dire note, if that 50-month moving average breaks and the bottom of that large red trading channel is of any consequence to this market, we could have some dark months ahead. Chances are we will not have to deal with an S&P 500 near 1500, but never say never.
With the latest Fed meeting behind us, and the next monthly jobs report, CPI report, and earnings season not due until July, we have a couple of weeks with not much going on. As I mentioned above this week is historically a week of unwinding of a bullish expiration week, but we didn't have a bullish expiration week so maybe the bulls have a small window of opportunity for a couple of quiet weeks to make something happen in this bear market.
-----------
Admin Notes:
Here's the link to the discussions regarding the new TSP.gov website: https://www.tsptalk.com/mb/tsp-talk-news-etc-/
And here is a list of known issues on tsp.gov: https://www.tsp.gov/new-tsp-features/known-issues/
The S&P 500 (C-fund) was up slightly on a high volume expiration Friday. The index is trying to hold near the bottom of its May / June trading channel. It's not a pretty looking picture but if that support can hold, there is a lot of room overhead with two major open gaps above that could be upside targets if the bulls can ever get something going.
DWCPF (S-fund) is also flirting with support and there are basically three outcomes that are most probable. We could see a bounce off support toward the upper end of the channel in an effort to fill the open gaps. We could see a breakdown below support which probably would trigger an "I give up" kind of a capitulation. Or third it could grind sideways to work off some oversold conditions while the prior low and the bottom of the lower open gap acts as resistance.
The EFA (I-fund) fell below support last week as the rising dollar was a big headwind. Getting back above 62 could be troublesome, but being so oversold and having those large open gaps above, the chances of some kind of bounce during the coming weeks look as promising as you can expect in a bear market, which is tentative.
BND (bonds / F-fund) was up slightly on Friday but the technical picture here continues to favor the downside, particularly if that overhead open gap gets filled.
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
To get weekly or daily notifications when we post new commentary, sign up HERE.
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.
