Stocks came into Monday morning with a heavy weight around its neck after some serious selling after the bell on Friday (an expiration day) when the futures plunged 30 S&P points, or another 1% after the closing bell, with a lot of finagling and positioning going on. The fact that the S&P 500 only opened down 3-points on Monday morning was actually a lot more impressive than it may have seemed, and to climb back and close up 0.65% on the day created a second major Monday positive reversal. The Dow ended the day up 154-points but it was the Nasdaq again, that led on the upside.
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Trading volume was very low after Friday's volume spike, but I'm not sure whether that's just a summer seasonal trend or if its a lack of big money getting involved. We've certainly heard enough about many folks sitting on the sidelines waiting for a pullback, or just sitting out until the coronavirus issues resolve themselves.
CNBC - There’s nearly $5 trillion parked in money markets as many investors are still afraid of stocks
The market has come such a long way since the March lows and that money on the sidelines could be the ammunition that keeps the rally going. The question is when will there will be another good opportunity to buy if the drift up is just going to continue relentlessly?
One red flag yesterday that we've talked about before was the fact that the big tech Nasdaq stocks continue to push the indices higher, while the average stock is still sort of floundering. On a day like yesterday where we saw modest gains almost across the board, the Equal Weight S&P 500 was up just 0.11% while the S&P 500 was up 0.65%, so big tech helped again. Going one step further and we can see how those large tech companies of the Nasdaq 100 performed yesterday in comparison.
I can't explain the valuations that we are seeing in the prices of some of the stocks that are flying recently, but history certainly suggests that it isn't uncommon for prices to be overvalued for long periods of time. Eventually the market will have another severe correction, but history also shows that it can take a lot longer to happen then we'd ever expect. When it happens, months or years of gains can be gone in weeks like we saw in March. When that will happen again is anyone's guess. Next month, next year, or longer?
The S&P 500 (C-fund) bounced back from Friday's losses, and as I mentioned above, it was even better than it appeared since the stock futures fell even further after Friday's close, but it recouped all of that, plus 20 more points by the close. Trading volume was very light compared to Friday quadruple witching volume. There's still an open gap lingering near 3180, which is about 2% above the current levels. The drop dead support levels are near 2970, which is about 3% lower from the current levels, so that's a fairly wide range that we can float within without changing the technical picture.
The DWCPF (S-fund) rallied about the same amount as the S&P 500. The low yesterday did test one of the rising support lines, depending how you draw them, and got a bounce, so that bull flag formation remains intact. Not all bull flags have been breaking to the upside as we'd expect lately, and this one is probably due to do something very soon.
The EFA (I-fund) was up big yesterday and the dollar falling really helped because several overseas markets were not doing that well yesterday.
The Dow Transportation Index lagged badly yesterday as Airline stocks pulled back sharply on the day. Technically, 8560 looks like some support that needs to hold or 8250 becomes a possibility.
The price of copper and lumber, two very economically sensitive commodities, have been roaring lately, and that is a good sign for the economy. Oil has bounced back as well so right now the expectations for an economic still look optimistic, at least according to these important "indicators."
BND (bonds / F-fund) rallied early and closed on the downside posting a negative reversal day. That looks like a bearish looking rising wedge pattern that is going to have to give soon. Technical analysis has been tough on the bonds chart for me so I don't even want to guess which way it will break, but typically rising wedges break down.
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. 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 position
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Trading volume was very low after Friday's volume spike, but I'm not sure whether that's just a summer seasonal trend or if its a lack of big money getting involved. We've certainly heard enough about many folks sitting on the sidelines waiting for a pullback, or just sitting out until the coronavirus issues resolve themselves.
CNBC - There’s nearly $5 trillion parked in money markets as many investors are still afraid of stocks
The market has come such a long way since the March lows and that money on the sidelines could be the ammunition that keeps the rally going. The question is when will there will be another good opportunity to buy if the drift up is just going to continue relentlessly?
One red flag yesterday that we've talked about before was the fact that the big tech Nasdaq stocks continue to push the indices higher, while the average stock is still sort of floundering. On a day like yesterday where we saw modest gains almost across the board, the Equal Weight S&P 500 was up just 0.11% while the S&P 500 was up 0.65%, so big tech helped again. Going one step further and we can see how those large tech companies of the Nasdaq 100 performed yesterday in comparison.
I can't explain the valuations that we are seeing in the prices of some of the stocks that are flying recently, but history certainly suggests that it isn't uncommon for prices to be overvalued for long periods of time. Eventually the market will have another severe correction, but history also shows that it can take a lot longer to happen then we'd ever expect. When it happens, months or years of gains can be gone in weeks like we saw in March. When that will happen again is anyone's guess. Next month, next year, or longer?
The S&P 500 (C-fund) bounced back from Friday's losses, and as I mentioned above, it was even better than it appeared since the stock futures fell even further after Friday's close, but it recouped all of that, plus 20 more points by the close. Trading volume was very light compared to Friday quadruple witching volume. There's still an open gap lingering near 3180, which is about 2% above the current levels. The drop dead support levels are near 2970, which is about 3% lower from the current levels, so that's a fairly wide range that we can float within without changing the technical picture.
The DWCPF (S-fund) rallied about the same amount as the S&P 500. The low yesterday did test one of the rising support lines, depending how you draw them, and got a bounce, so that bull flag formation remains intact. Not all bull flags have been breaking to the upside as we'd expect lately, and this one is probably due to do something very soon.
The EFA (I-fund) was up big yesterday and the dollar falling really helped because several overseas markets were not doing that well yesterday.
The Dow Transportation Index lagged badly yesterday as Airline stocks pulled back sharply on the day. Technically, 8560 looks like some support that needs to hold or 8250 becomes a possibility.
The price of copper and lumber, two very economically sensitive commodities, have been roaring lately, and that is a good sign for the economy. Oil has bounced back as well so right now the expectations for an economic still look optimistic, at least according to these important "indicators."
BND (bonds / F-fund) rallied early and closed on the downside posting a negative reversal day. That looks like a bearish looking rising wedge pattern that is going to have to give soon. Technical analysis has been tough on the bonds chart for me so I don't even want to guess which way it will break, but typically rising wedges break down.
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. 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 position
