Another major reversal for stocks on Friday and this was one of the few that saw stocks down early and finish strong. The Dow was actually negative at 2:40 PM ET before someone flipped a switch and a massive rally ensued in the final 80 minutes of trading. It was just the second positive close for the S&P 500 in the last nine trading sessions, and the prior one was just a gain of 0.28%. Friday's was a 2.45% gain for the S&P. Small caps kept up with the large caps, but the I-fund will have to wait another day before the overseas markets catch up to that late Friday rally in the U.S. Bonds were up.
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The small caps are a different story. They are more volatile and can rise and fall a lot faster than the S&P 500, so while we could see a decent bounce here, they are vulnerable while they remain below that 50 week average. If it can manage a move back up to the 50-week average, that would be more than 10% from where it is now. So even if it fails there, that's a strong playable bounce.
The 10-year Treasury Yield move down sharply on Friday but it remains in that bullish looking flag (red.) We could see a move to the bottom of the flag near 1.7% and still be within that flag, and bull flags tend to break to the upside. If it doesn't break out and instead starts to head lower again, it could be because of evidence of the economy weakening.
After a big jump in GDP in the fourth quarter of 2021 of 6.5%, the initial GDP estimate of the 1st quarter growth for 2022 from GDPNow is just 0.1%.
The recent rally in the dollar hasn't been friendly to the I-fund, but the I-fund continues to outperform the U.S. stock funds. The 26 area can act as support, now that it is above that old high, but that large open gap is always a possible pullback target.
We'll get earnings from some big companies like Amazon, Google, and Facebook this week, which can be market movers and potentially a catalyst to add onto Friday's positive reversal, but the bears are not going to go away easily as they still have the upper hand. The key for the market now is whether it can withstand the current sell the rally pressure from those algorithm trading programs.
There's a lot of geopolitical activity going on at the Russian border that could pose trouble for the market. Plus the wealth creating effects of bitcoin and other crypto-currencies, which had been a catalyst for the stocks market until they started to move lower, may be running into more problems as President Biden is planning executive action to have government agencies regulate the cryptos and NFTs.
The S&P 500 (C-fund) posted a big reversal, and it was an outside positive reversal day, which adds to the strength and probability that it could hold. In reality it remains in that range between 4300 and 4450, so if the bulls have trouble taking out the top of that range early on Monday, the bears would put up a fight. A breakout above 4450 and we could see an eventual bounce up toward the 20 and 50 day averages.
The DWCPF (small caps / S-fund) had a big day after a big reversal, but this remains in a clear downtrend below resistance. There has been a pattern of double bottom mini rallies that failed after a few days, so we'll see if we can even get one of those.
The EFA was up moderately as the overseas markets were long closed by the time we got the late rally on Friday, and the TSP decided not to add any fair value to the I-fund price. That should mean a big gain for today's price, as long as the overseas market don't crumble.
BND (Bonds / F-fund) rebounded on Friday but remains in a down trend and below descending resistance.
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
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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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Despite the strong earnings report from Apple after the bell on Thursday and an initial positive reaction in the overnight futures, we saw another weak open on Friday as the whipsawing continued. But as we have been seeing regularly in the market, if you don't like the direction that stocks are going at the moment, just wait a few minutes and it may reverse itself, as it did late on Friday.
Whether this reversal is finally going to trigger some kind of meaningful relief rally or just flip back over as it has been doing remains to be seen, but selling pressure like we've experienced in recent weeks tends to eventually run out of steam, and even the dead cat will bounce.
In a bull market, there's a very strong tendency for the 50-week moving average to act as support during a pullback / correction. If it doesn't hold, then you have some problems like we saw in early 2020, but so far there has not been a close below the average during this current decline.
Whether this reversal is finally going to trigger some kind of meaningful relief rally or just flip back over as it has been doing remains to be seen, but selling pressure like we've experienced in recent weeks tends to eventually run out of steam, and even the dead cat will bounce.
In a bull market, there's a very strong tendency for the 50-week moving average to act as support during a pullback / correction. If it doesn't hold, then you have some problems like we saw in early 2020, but so far there has not been a close below the average during this current decline.
The small caps are a different story. They are more volatile and can rise and fall a lot faster than the S&P 500, so while we could see a decent bounce here, they are vulnerable while they remain below that 50 week average. If it can manage a move back up to the 50-week average, that would be more than 10% from where it is now. So even if it fails there, that's a strong playable bounce.
The 10-year Treasury Yield move down sharply on Friday but it remains in that bullish looking flag (red.) We could see a move to the bottom of the flag near 1.7% and still be within that flag, and bull flags tend to break to the upside. If it doesn't break out and instead starts to head lower again, it could be because of evidence of the economy weakening.
After a big jump in GDP in the fourth quarter of 2021 of 6.5%, the initial GDP estimate of the 1st quarter growth for 2022 from GDPNow is just 0.1%.
The recent rally in the dollar hasn't been friendly to the I-fund, but the I-fund continues to outperform the U.S. stock funds. The 26 area can act as support, now that it is above that old high, but that large open gap is always a possible pullback target.
We'll get earnings from some big companies like Amazon, Google, and Facebook this week, which can be market movers and potentially a catalyst to add onto Friday's positive reversal, but the bears are not going to go away easily as they still have the upper hand. The key for the market now is whether it can withstand the current sell the rally pressure from those algorithm trading programs.
There's a lot of geopolitical activity going on at the Russian border that could pose trouble for the market. Plus the wealth creating effects of bitcoin and other crypto-currencies, which had been a catalyst for the stocks market until they started to move lower, may be running into more problems as President Biden is planning executive action to have government agencies regulate the cryptos and NFTs.
The S&P 500 (C-fund) posted a big reversal, and it was an outside positive reversal day, which adds to the strength and probability that it could hold. In reality it remains in that range between 4300 and 4450, so if the bulls have trouble taking out the top of that range early on Monday, the bears would put up a fight. A breakout above 4450 and we could see an eventual bounce up toward the 20 and 50 day averages.
The DWCPF (small caps / S-fund) had a big day after a big reversal, but this remains in a clear downtrend below resistance. There has been a pattern of double bottom mini rallies that failed after a few days, so we'll see if we can even get one of those.
The EFA was up moderately as the overseas markets were long closed by the time we got the late rally on Friday, and the TSP decided not to add any fair value to the I-fund price. That should mean a big gain for today's price, as long as the overseas market don't crumble.
BND (Bonds / F-fund) rebounded on Friday but remains in a down trend and below descending resistance.
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.
