Stocks opened on Monday with one of the largest gaps higher that we've seen in a while. That gain took most of the indices well above the resistance line of prior highs, but that was quite an extreme and we saw profit takers go to work almost immediately. The S&P 500, up about 135-points at the opening high, closed up "just" 41, so it was quite a reversal. The Dow gained 855 and percentage-wise beat most indices but the Russell 2000 small caps which were up 3.6%. I'm not really certain why our S-fund, the small caps index, lagged with just a 0.66% gain.
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We knew there were risks related to the election, but the risk to the bears was being on the sidelines if / when a vaccine was announced, or a stimulus bill was passed. Yesterday the bears got hit by one of those. Pfizer trials showed a 90% efficacy in their testing, which was well above a 75% efficacy, which would have been acceptable.
The decline off the highs was as big of a story as the gains we had yesterday. In one day we had a gain of 3.9% in the S&P 500, then a decline of 2.6% off those highs into the close. That was on top of the 7% plus gains in the S&P last week, you can see that we had gotten quite extended and profit taking wasn't a surprise.
The Equal Weighted S&P 500 was up a whopping 4.29%, and that was well off the morning highs. A Tremendous gain.
The S&P 500 Index (those same 500 stocks above) was "only" up 1.17%, so what happened?
The large tech stocks took one on the chin making it one of the strangest trading days that we have seen in some time.
The Dow and Russell 2000 were each up 3% or more, yet the Nasdaq was down 1.5%. Very unusual activity.
What does that mean going forward? Normally when stocks are up big you would expect the VIX (Volatility Index) to be down, but when the movement was like what we saw yesterday, the gain in the VIX of more than 3% isn't as much of a surprise, and that could be a warning sign - for the short-term, anyway.
Wednesday is Veteran's Day and it is a TSP holiday so they won't be processing transactions tomorrow, despite the market being open.
The S&P 500 (C-fund) did what it did, and I doubt anybody needs more explanation. It's a nasty negative reversal and a failed breakout in the intermediate term, but like I said, falling 2.6% off the highs was a pullback in and of itself already. It's possible that the October high could act as support, and it really needs to if the bulls want to remain in control. If we flipped this chart upside down with that large spike in volume, it would look like a market low, so what's the opposite of that?
The weekly chart shot up to the long-term resistance line that was tagged near the opening bell, and it spent the rest of the day slipping back below that line. A rare weekly gap is now open between yesterday's low, and Friday's high.
The DWCPF (S-fund) broke out to new highs and hit 1745 before failing and closing just modestly higher under 1700. That's a negative reversal of epic proportions so we'll have to see how eager the dip buyers are to buy this failed break out.
The Russell 2000 weekly chart shows it gapping up above both of the prior highs going back to early 2020 and mid-2018. Now that old resistance line is the only thing in the way of it coming back to fill that large open gap. It's been moving sideways for over 2 years, as far as it closing about where it was in the 2018 highs, so it's had virtually no gain for over 2 years, and the Russell may just be due to start making up for that lost time. We'll see if investors agree or not. That move from the March lows to yesterday's high is now nearly +100% in 8 months.
The Dow Transportation Index did close higher but the story is the same - A failed breakout and open gaps below that may need filled.
BND (F-fund) gapped lower on the positive news for the economy, as yields rallied. It's back in that descending channel with yields trending higher, which could be a good sign for the economy. At least until the next headline comes out.
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. Enjoy your holiday. And to all our veterans out there, thank you very much for your service!! We'll see you back here on Thursday.
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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We knew there were risks related to the election, but the risk to the bears was being on the sidelines if / when a vaccine was announced, or a stimulus bill was passed. Yesterday the bears got hit by one of those. Pfizer trials showed a 90% efficacy in their testing, which was well above a 75% efficacy, which would have been acceptable.
The decline off the highs was as big of a story as the gains we had yesterday. In one day we had a gain of 3.9% in the S&P 500, then a decline of 2.6% off those highs into the close. That was on top of the 7% plus gains in the S&P last week, you can see that we had gotten quite extended and profit taking wasn't a surprise.
The Equal Weighted S&P 500 was up a whopping 4.29%, and that was well off the morning highs. A Tremendous gain.
The S&P 500 Index (those same 500 stocks above) was "only" up 1.17%, so what happened?
The large tech stocks took one on the chin making it one of the strangest trading days that we have seen in some time.
The Dow and Russell 2000 were each up 3% or more, yet the Nasdaq was down 1.5%. Very unusual activity.
What does that mean going forward? Normally when stocks are up big you would expect the VIX (Volatility Index) to be down, but when the movement was like what we saw yesterday, the gain in the VIX of more than 3% isn't as much of a surprise, and that could be a warning sign - for the short-term, anyway.
Wednesday is Veteran's Day and it is a TSP holiday so they won't be processing transactions tomorrow, despite the market being open.
The S&P 500 (C-fund) did what it did, and I doubt anybody needs more explanation. It's a nasty negative reversal and a failed breakout in the intermediate term, but like I said, falling 2.6% off the highs was a pullback in and of itself already. It's possible that the October high could act as support, and it really needs to if the bulls want to remain in control. If we flipped this chart upside down with that large spike in volume, it would look like a market low, so what's the opposite of that?
The weekly chart shot up to the long-term resistance line that was tagged near the opening bell, and it spent the rest of the day slipping back below that line. A rare weekly gap is now open between yesterday's low, and Friday's high.
The DWCPF (S-fund) broke out to new highs and hit 1745 before failing and closing just modestly higher under 1700. That's a negative reversal of epic proportions so we'll have to see how eager the dip buyers are to buy this failed break out.
The Russell 2000 weekly chart shows it gapping up above both of the prior highs going back to early 2020 and mid-2018. Now that old resistance line is the only thing in the way of it coming back to fill that large open gap. It's been moving sideways for over 2 years, as far as it closing about where it was in the 2018 highs, so it's had virtually no gain for over 2 years, and the Russell may just be due to start making up for that lost time. We'll see if investors agree or not. That move from the March lows to yesterday's high is now nearly +100% in 8 months.
The Dow Transportation Index did close higher but the story is the same - A failed breakout and open gaps below that may need filled.
BND (F-fund) gapped lower on the positive news for the economy, as yields rallied. It's back in that descending channel with yields trending higher, which could be a good sign for the economy. At least until the next headline comes out.
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. Enjoy your holiday. And to all our veterans out there, thank you very much for your service!! We'll see you back here on Thursday.
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.
