Stocks rallied nicely after the May jobs report missed estimates on Friday. This told investors that the economy is growing, but perhaps not fast enough to be concerned about interest rate hikes. The Dow gained 179-points and the dollar was down sharply helping push prices higher in most assets. Bonds rallied with yields falling on the weaker than expected data.
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Over the weekend the headlines were surrounding the G-7 meeting where the participating nations agreed to a global minimum corporate tax of at least 15%. It targets the largest companies in the world, but is this game changer for corporate profits? Will it mean higher prices for consumers, adding to inflation fears? It will be interesting to see how the market reacts to this news today.
Back to the jobs report, we can go back to the April report, which came out on May 7th, which was a disaster report yet stocks rallied sharply, similar to what we saw on Friday. Unfortunately for the bulls, stocks rolled over the following Monday back so the rally triggered by the weak jobs report was short-lived. Is that what we'll see early this week? Will the G-7 corporate tax announcement be that catalyst or will the decelerating jobs data eventually be a detriment to stocks?
Internally on Friday the up issues easily outpaced the down issues on both the NYSE and Nasdaq. Perhaps it was because the heavily traded meme stocks like AMC were down on the day, but the NYSE was only flat on the volume breadth. The Nasdaq breadth was better as tech stock did well. But as I talked about late last week, the charts of those big tech stocks still look troublesome.
The dollar was down again after Thursday's rally, and the stock market has certainly been playing the counter move here. When the dollar is down, stocks have done well. When the dollar rallies stocks have struggled a bit. The 24.1 area has been the low and there are a few open gaps above that could draw some short-term attention.
The yield on the 10-year Treasury above fell back below the moving average that had been holding up well for weeks. If the economy is not quite growing at analysts lofty expectations, perhaps this will break down and push bond prices and the F-fund higher? In theory stocks would like that as the market had a couple of pullbacks earlier in the year when yields were rallying, but at what point would a slower growing economy be a hindrance for the stock market?
The futures market had not opened yet on Sunday evening as of this writing, and as I said above, the big question going into the new week is how the market will react to the global minimum corporate tax announcement.
The S&P 500 (C-fund) made its 2nd highest close ever on Friday, and ironically the highest close was also the day of the prior jobs report. This has the makings of a flat top and / or a double top. But if the bulls still have any ammunition, we could obviously see a breakout. The question is, would any double top pullback be buyable, or will the G-7 corporate tax announcement be a game changer for the rally?
The long-term monthly chart shows that the S&P 500 is pretty stretched to the upside. You never know how long a rally will last as momentum is something that seems to go on longer than expected, but generally when they do end from lofty levels like the one we're in now, the fall can can be swift and end with a thud.
The DWCPF (S-fund) has been climbing steadily since the low in early May. It is back in the area that was the top of an open gap from a month ago. It has been trading in a wide range since peaking in February and it is inching closer to that level. 2200 - 2260 seems to be the trouble spots.
The EFA / I-fund made another new high on Friday and of course the decline in the dollar helped, but here the chart is back up again the top of its rising trading channel. It has been about a month since it last tested the 50-day EMA, which had been getting tested about every few weeks earlier this year.
Japan's market is one of the larger holdings for the I-fund and while it is back above its 50-day EMA, it has been lagging a bit and the recent rally is now coming up against its descending resistance line.
The Dow Transportation Index did not participate in Friday's rally and it remains in a sideways consolidation, which is allowing the 50-day EMA to move up to it. That pronounced negative reversal day on May 10th (the Monday after the last jobs report) has been the peak and whether this consolidation holds may determine if that was a major top that will last a while, or just a temporary peak to allow the chart, which had been very hot, to cool down before its next leg higher.
BND (bonds / F-fund) posted a ig day on Friday as yields fell on the weaker than expected economic data. It is now up against the 200-day EMA, which it has traded below since the gap down on February 16.
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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Over the weekend the headlines were surrounding the G-7 meeting where the participating nations agreed to a global minimum corporate tax of at least 15%. It targets the largest companies in the world, but is this game changer for corporate profits? Will it mean higher prices for consumers, adding to inflation fears? It will be interesting to see how the market reacts to this news today.
Back to the jobs report, we can go back to the April report, which came out on May 7th, which was a disaster report yet stocks rallied sharply, similar to what we saw on Friday. Unfortunately for the bulls, stocks rolled over the following Monday back so the rally triggered by the weak jobs report was short-lived. Is that what we'll see early this week? Will the G-7 corporate tax announcement be that catalyst or will the decelerating jobs data eventually be a detriment to stocks?
Internally on Friday the up issues easily outpaced the down issues on both the NYSE and Nasdaq. Perhaps it was because the heavily traded meme stocks like AMC were down on the day, but the NYSE was only flat on the volume breadth. The Nasdaq breadth was better as tech stock did well. But as I talked about late last week, the charts of those big tech stocks still look troublesome.
The dollar was down again after Thursday's rally, and the stock market has certainly been playing the counter move here. When the dollar is down, stocks have done well. When the dollar rallies stocks have struggled a bit. The 24.1 area has been the low and there are a few open gaps above that could draw some short-term attention.
The yield on the 10-year Treasury above fell back below the moving average that had been holding up well for weeks. If the economy is not quite growing at analysts lofty expectations, perhaps this will break down and push bond prices and the F-fund higher? In theory stocks would like that as the market had a couple of pullbacks earlier in the year when yields were rallying, but at what point would a slower growing economy be a hindrance for the stock market?
The futures market had not opened yet on Sunday evening as of this writing, and as I said above, the big question going into the new week is how the market will react to the global minimum corporate tax announcement.
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The S&P 500 (C-fund) made its 2nd highest close ever on Friday, and ironically the highest close was also the day of the prior jobs report. This has the makings of a flat top and / or a double top. But if the bulls still have any ammunition, we could obviously see a breakout. The question is, would any double top pullback be buyable, or will the G-7 corporate tax announcement be a game changer for the rally?
The long-term monthly chart shows that the S&P 500 is pretty stretched to the upside. You never know how long a rally will last as momentum is something that seems to go on longer than expected, but generally when they do end from lofty levels like the one we're in now, the fall can can be swift and end with a thud.
The DWCPF (S-fund) has been climbing steadily since the low in early May. It is back in the area that was the top of an open gap from a month ago. It has been trading in a wide range since peaking in February and it is inching closer to that level. 2200 - 2260 seems to be the trouble spots.
The EFA / I-fund made another new high on Friday and of course the decline in the dollar helped, but here the chart is back up again the top of its rising trading channel. It has been about a month since it last tested the 50-day EMA, which had been getting tested about every few weeks earlier this year.
Japan's market is one of the larger holdings for the I-fund and while it is back above its 50-day EMA, it has been lagging a bit and the recent rally is now coming up against its descending resistance line.
The Dow Transportation Index did not participate in Friday's rally and it remains in a sideways consolidation, which is allowing the 50-day EMA to move up to it. That pronounced negative reversal day on May 10th (the Monday after the last jobs report) has been the peak and whether this consolidation holds may determine if that was a major top that will last a while, or just a temporary peak to allow the chart, which had been very hot, to cool down before its next leg higher.
BND (bonds / F-fund) posted a ig day on Friday as yields fell on the weaker than expected economic data. It is now up against the 200-day EMA, which it has traded below since the gap down on February 16.
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.
