Stocks traded in a tight range on a choppy Monday with a bit of little fishy action near the close. The close is really all that matters, especially if you made an IFT yesterday, and the big three indices, plus the small caps, all closed in positive territory. Another good month for stocks as July moves into the rear-view mirror with the Dow ending the month with its 15th gain in the last 16 sessions. Bonds were up with yields moving sideways to slightly lower.
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The big three indices, the Dow, S&P 500, and Nasdaq were all trading near the lows of the day at 3:50 PM ET with ten minutes to go in the day, and there seemed to be some end of month shenanigans in those final 10 minutes of trading because the indices moves from the lows to the highs of the day. I wonder who had that kind of influence?
The dollar was down early yesterday but for a second day in a row, it closed strong and near the highs of the day. It's under the 200-day MA, which could act as resistance, but in recent encounters it hasn't been much of a factor. The dollar has a major impact on the price of the I-fund but the price of everything is somehow influenced by its movement and a stronger dollar can put pressure on prices.
We haven't really seen that in US stocks and certainly not in the price of oil, which touched $82 yesterday before settling at 81.80 making it a 22% gain in a month.
As for the indices, as we have said many times, stocks can and will move further in one direction than seems reasonable, and right now that translates into a price that is 411 points above its 200-day EMA. All of those red lines represent 411 points above the 200-day EMA and you can see that it is not common to get much higher than that, even in the strongest bull market, without at least a modest pullback starting. Using percentages as well as points gives us a similar result.
We did see similar stretches after the COVID crash but as we talked about the other day, the Fed had the spigots open in 2020 and 2021, and interest rates were 0% at that time. It's a different environment now.
Clearly the market is reacting to something and the bull market is absolutely real, but even in the best of times, sometimes things go too far and have to correct before going further. When that will be is likely only a matter of time, but days, weeks months? I wish I knew. The close yesterday reminded us that the action does not have to be rational.
Apple and Amazon report earnings after the bell on Thursday, and on Friday we will get the July jobs report before the opening bell, so Friday's trading is setting up to be a big day for stocks, one way or the other.
The S&P 500 (C-fund) is no longer climbing a wall of worry. It seems to be climbing on the backs of the bears who have been underinvested and crawling in with their tails between their legs. There's certainly good news over inflation and a possible end to interest rate hikes, but this action seems sentiment related and FOMO is creating some of the bullish activity.
DWCPF (S-fund) had that odd negative reversal day within the bull flag, but in recent months it seems that any negative formation can be ignored. Despite the fact that I don't own any S-fund right now, unfortunately, I like to see patterns that do what they are supposed to do, like that bull flag.
EFA (I-fund) was flat as all of the eventual gains in the US indices came in the final 2 minutes of trading. We saw a bullish flag breakout here as well but there are three big reasons below (in red) to be concerned about a pullback.
BND (bonds / F-fund) was up for a second straight day after the sell off last Thursday. The 200-day MA (orange) is holding so far, but right now, so is the 50-day EMA (purple.)
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
Daily Market Commentary Archives
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Thanks so much 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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The big three indices, the Dow, S&P 500, and Nasdaq were all trading near the lows of the day at 3:50 PM ET with ten minutes to go in the day, and there seemed to be some end of month shenanigans in those final 10 minutes of trading because the indices moves from the lows to the highs of the day. I wonder who had that kind of influence?
The dollar was down early yesterday but for a second day in a row, it closed strong and near the highs of the day. It's under the 200-day MA, which could act as resistance, but in recent encounters it hasn't been much of a factor. The dollar has a major impact on the price of the I-fund but the price of everything is somehow influenced by its movement and a stronger dollar can put pressure on prices.
We haven't really seen that in US stocks and certainly not in the price of oil, which touched $82 yesterday before settling at 81.80 making it a 22% gain in a month.
As for the indices, as we have said many times, stocks can and will move further in one direction than seems reasonable, and right now that translates into a price that is 411 points above its 200-day EMA. All of those red lines represent 411 points above the 200-day EMA and you can see that it is not common to get much higher than that, even in the strongest bull market, without at least a modest pullback starting. Using percentages as well as points gives us a similar result.
We did see similar stretches after the COVID crash but as we talked about the other day, the Fed had the spigots open in 2020 and 2021, and interest rates were 0% at that time. It's a different environment now.
Clearly the market is reacting to something and the bull market is absolutely real, but even in the best of times, sometimes things go too far and have to correct before going further. When that will be is likely only a matter of time, but days, weeks months? I wish I knew. The close yesterday reminded us that the action does not have to be rational.
Apple and Amazon report earnings after the bell on Thursday, and on Friday we will get the July jobs report before the opening bell, so Friday's trading is setting up to be a big day for stocks, one way or the other.
The S&P 500 (C-fund) is no longer climbing a wall of worry. It seems to be climbing on the backs of the bears who have been underinvested and crawling in with their tails between their legs. There's certainly good news over inflation and a possible end to interest rate hikes, but this action seems sentiment related and FOMO is creating some of the bullish activity.
DWCPF (S-fund) had that odd negative reversal day within the bull flag, but in recent months it seems that any negative formation can be ignored. Despite the fact that I don't own any S-fund right now, unfortunately, I like to see patterns that do what they are supposed to do, like that bull flag.
EFA (I-fund) was flat as all of the eventual gains in the US indices came in the final 2 minutes of trading. We saw a bullish flag breakout here as well but there are three big reasons below (in red) to be concerned about a pullback.
BND (bonds / F-fund) was up for a second straight day after the sell off last Thursday. The 200-day MA (orange) is holding so far, but right now, so is the 50-day EMA (purple.)
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
Daily Market Commentary Archives
To get weekly or daily notifications when we post new commentary, sign up HERE.
Thanks so much 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.
