Another very interesting day for stocks as we saw the different indices moving almost counter to each other. The Dow opened near its highs of the day and sold off all day to close down 324-points. Meanwhile the Nasdaq rallied in the afternoon to close with a small gain - mostly because of the strength in the semiconductor stocks. Bonds closed mostly flat but they were all over the board during the intraday trading. The dollar rallied, oil fell sharply again, and the Transports took another nose dive.
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Yesterday the crazy trading in Robinhood was the biggest story on The Street. It was up 50% yesterday after last week's lackluster IPO. The Robinhood traders who basically created the meme stocks (like GME and AMC) now seem to be doing the same for their online broker. Ironically, Robinhood restricted trading on GME and AMC earlier this year because of the crazy volatility, and it was quite controversial. Will they do the same with their own stock? I doubt it.
The Internal numbers were mostly negative, with more than 2 to 1 declining issues on the NYSE over advancing, and the gain in the Nasdaq masked a lot of underlying weakness as the declining issues led advancers by almost 2 to 1 as well.
Declining volume on the NYSE was more than 3 to 1 in favor of decliners and that's quite a bit - so much so that, if we remain in a bullish uptrend, this could be an extreme near a low. However it can get pinned at these levels during a more serious correction.
The Nasdaq volume was closer to even and that is likely because those semiconductor stocks have continued to perform very well.
The yield on the 10-year Treasury tested the July 20 low and held yesterday, and that spinning top formation may be a sign of a reversal, even if it's just a short term move. The trend is clearly down and the 1.22% area could still act as resistance.
The dollar was up after a brief breakdown below the 50-day EMA. Instead it closed above the 200-day EMA. Yesterday I said one of these moving averages would have to give soon. Yesterday they both gave way, but in the end the 50-day EMA seems to be the one holding.
The delta variant outbreak continues to add concerns of another potential slowdown in the economy as the masks on / masks off, and shutdowns on / shutdowns off continue to be discussed. You can tell when the market is selling off like it did yesterday, yet a company like Zoom was up nearly 7% on the day.
The July jobs report will be released on Friday and estimates are looking for a gain of 925,000 jobs, and an unemployment rate of 5.6%.
The S&P 500 (C-fund) had an inside day of trading with the high and low of the day trading within the high and low of Tuesday's range. That's generally not too meaningful and more of a continuation pattern than a sign of a reversal. It's still above the 20-day EMA and, although I didn't draw it in today, that could be a bull flag forming off the July 19 low. That sounds good but a similar pattern broke down sharply in July, although it was just a two day pullback and the S&P came right back.
The DWCPF (S-fund) had what looked like a head and shoulders pattern forming back in mid-July when it abruptly, and what felt like prematurely, broke down. Like the S&P, it snapped right back and now it looks like the head and shoulders pattern is continuing what it was trying to do before that quick sell off. The Russell 2000 small caps index was down 1.25% yesterday so this 0.50% loss was not bad for the S-fund, but the head and shoulders pattern could be a concern.
The EFA / I-fund gave back some of its recent gains, and the strength in the dollar added some pressure. The rising support line is still intact but we'd need to see some gains today to keep that going.
The Dow Transportation Index looked so nice on Tuesday as it ran up to that 100-day EMA resistance line, but this is what resistance does as it pulled back 2.35% yesterday. This has been in a downtrend for months now and is considered one of the market leading indices, so maybe we should be concerned.
The BND (bonds / F-fund) broke out temporarily on Wednesday but that breakout failed by the close. So much for July 20 being a high, but highs don't tend to be made in a day. It's more of a process. I called July 20 the possible top, and here we are revisiting that area again. I am still very surprised that yields just continue to fall in an environment that is supposed the be one of the fastest growing economies that we've seen in many years.
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 the crazy trading in Robinhood was the biggest story on The Street. It was up 50% yesterday after last week's lackluster IPO. The Robinhood traders who basically created the meme stocks (like GME and AMC) now seem to be doing the same for their online broker. Ironically, Robinhood restricted trading on GME and AMC earlier this year because of the crazy volatility, and it was quite controversial. Will they do the same with their own stock? I doubt it.
The Internal numbers were mostly negative, with more than 2 to 1 declining issues on the NYSE over advancing, and the gain in the Nasdaq masked a lot of underlying weakness as the declining issues led advancers by almost 2 to 1 as well.
Declining volume on the NYSE was more than 3 to 1 in favor of decliners and that's quite a bit - so much so that, if we remain in a bullish uptrend, this could be an extreme near a low. However it can get pinned at these levels during a more serious correction.
The Nasdaq volume was closer to even and that is likely because those semiconductor stocks have continued to perform very well.
The yield on the 10-year Treasury tested the July 20 low and held yesterday, and that spinning top formation may be a sign of a reversal, even if it's just a short term move. The trend is clearly down and the 1.22% area could still act as resistance.
The dollar was up after a brief breakdown below the 50-day EMA. Instead it closed above the 200-day EMA. Yesterday I said one of these moving averages would have to give soon. Yesterday they both gave way, but in the end the 50-day EMA seems to be the one holding.
The delta variant outbreak continues to add concerns of another potential slowdown in the economy as the masks on / masks off, and shutdowns on / shutdowns off continue to be discussed. You can tell when the market is selling off like it did yesterday, yet a company like Zoom was up nearly 7% on the day.
The July jobs report will be released on Friday and estimates are looking for a gain of 925,000 jobs, and an unemployment rate of 5.6%.
The S&P 500 (C-fund) had an inside day of trading with the high and low of the day trading within the high and low of Tuesday's range. That's generally not too meaningful and more of a continuation pattern than a sign of a reversal. It's still above the 20-day EMA and, although I didn't draw it in today, that could be a bull flag forming off the July 19 low. That sounds good but a similar pattern broke down sharply in July, although it was just a two day pullback and the S&P came right back.
The DWCPF (S-fund) had what looked like a head and shoulders pattern forming back in mid-July when it abruptly, and what felt like prematurely, broke down. Like the S&P, it snapped right back and now it looks like the head and shoulders pattern is continuing what it was trying to do before that quick sell off. The Russell 2000 small caps index was down 1.25% yesterday so this 0.50% loss was not bad for the S-fund, but the head and shoulders pattern could be a concern.
The EFA / I-fund gave back some of its recent gains, and the strength in the dollar added some pressure. The rising support line is still intact but we'd need to see some gains today to keep that going.
The Dow Transportation Index looked so nice on Tuesday as it ran up to that 100-day EMA resistance line, but this is what resistance does as it pulled back 2.35% yesterday. This has been in a downtrend for months now and is considered one of the market leading indices, so maybe we should be concerned.
The BND (bonds / F-fund) broke out temporarily on Wednesday but that breakout failed by the close. So much for July 20 being a high, but highs don't tend to be made in a day. It's more of a process. I called July 20 the possible top, and here we are revisiting that area again. I am still very surprised that yields just continue to fall in an environment that is supposed the be one of the fastest growing economies that we've seen in many years.
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.
