Stocks open flat and mixed on Tuesday but they caught a bid around 10 AM ET and a major rally ensued. The Dow gained 372-points, and despite some issues with a few large tech stocks, the Nasdaq and small caps led on the upside on a day with few catalysts. The indices are up against some resistance and it looks like a make or break area. A gap up open above resistance would probably frustrate the most people, so that's a possibility. Bonds were down as yields made a new high.
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The S&P 500 (C-fund) is forming a bull flag, which tend to break to the upside, but there's still a lot of resistance at yesterday's highs where the 20-day EMA meets the top of that flag. A move to the bottom of the flag is possible, as is a breakout. The 50-day EMA would be right in the way of a breakout, right where a descending resistance line crosses it, so it may not be so easy. But it looks like the bulls could try to make their move.
The DWCPF (small caps / S-fund) is also at the top of a bull flag and it could break out to the upside from here, but it could move down again to test the lower end of the flag just as easily. The 20-day EMA has been holding as resistance here as well. I know I am repeating myself a lot. but that's what's happening.
The EFA (I-fund) is still stuck below its 200-day EMA, which is a much more serious roadblock than a 20 or 50 day average, but it has been hanging around that area long enough, and the longer it knocks on the door without the bears making their move, the more likely the bulls will walk through it.
BND (Bonds / F-fund) continues to lag and even the open gaps could not lure it up to fill them. It looks like it could be ready for a waterfall like decline, but sentiment for bonds is so negative that a relief rally may not be far off.
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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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We had been seeing a series of weak closes lately - very weak - but something seemed to have changed yesterday despite there being very few catalysts on the docket. Yesterday the intraday rally held, and it did so without the help of the recently strong energy sector, and tech stocks like Facebook (Meta), PayPal, Google. The broader indices like the Nasdaq and Russell 2000 outperformed as these were the most heavily sold stocks during the correction.
Now many of the charts are in an area where we could see a breakout, or break back down as resistance is tested at the top of some bullish looking flags.
The yield on the 10-year Treasury made another new high as it closed at 1.95%, inching closer to 2.0%, which the market had been concerned about, but perhaps the market is now in a "buy the news" mode after "selling the rumor" leading up to this point?
I'm not so sure that we have seen the lows, but the market has been beaten down quite a bit in recent weeks, and even in the worst of bear markets, we tend to get some very strong relief rallies. We could be in the midst of one of those now. Seasonality favors the bulls for the next week, but after that it's a bear fest in late February. Perhaps that is when we'll see a test of the lows?
Now many of the charts are in an area where we could see a breakout, or break back down as resistance is tested at the top of some bullish looking flags.
The yield on the 10-year Treasury made another new high as it closed at 1.95%, inching closer to 2.0%, which the market had been concerned about, but perhaps the market is now in a "buy the news" mode after "selling the rumor" leading up to this point?
I'm not so sure that we have seen the lows, but the market has been beaten down quite a bit in recent weeks, and even in the worst of bear markets, we tend to get some very strong relief rallies. We could be in the midst of one of those now. Seasonality favors the bulls for the next week, but after that it's a bear fest in late February. Perhaps that is when we'll see a test of the lows?
The S&P 500 (C-fund) is forming a bull flag, which tend to break to the upside, but there's still a lot of resistance at yesterday's highs where the 20-day EMA meets the top of that flag. A move to the bottom of the flag is possible, as is a breakout. The 50-day EMA would be right in the way of a breakout, right where a descending resistance line crosses it, so it may not be so easy. But it looks like the bulls could try to make their move.
The DWCPF (small caps / S-fund) is also at the top of a bull flag and it could break out to the upside from here, but it could move down again to test the lower end of the flag just as easily. The 20-day EMA has been holding as resistance here as well. I know I am repeating myself a lot. but that's what's happening.
The EFA (I-fund) is still stuck below its 200-day EMA, which is a much more serious roadblock than a 20 or 50 day average, but it has been hanging around that area long enough, and the longer it knocks on the door without the bears making their move, the more likely the bulls will walk through it.
BND (Bonds / F-fund) continues to lag and even the open gaps could not lure it up to fill them. It looks like it could be ready for a waterfall like decline, but sentiment for bonds is so negative that a relief rally may not be far off.
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.
