Stocks opened higher yesterday morning, but as is often the case on a Monday following a Friday sell-off, the gap was quickly filled. Now the bulls will look for a Turnaround Tuesday to turn this ship around. It was a mixed day as the Dow closed positive, although it was up over 200+ points in the mid-afternoon, and the S&P 500 was positive as late as 2:30 PM ET before tanking in the final minutes. Yields fell again giving the F-fund its 4th positive close in a row.
It looked like algorithm selling kicked very late on Monday in the broader indices once they went red in that final our of trading. It's always tough to trust a gap up open on a Monday after a weak Friday, so Monday's action wasn't too surprising, but given the lack of a catalyst, there was some optimism that Friday's overreaction to... something... would be reversed on Monday, but that was not to be.
So, it's now up to Turnaround Tuesday or, if the market is concerned about Nvidia's earnings, it could be a Thursday reaction as they report earnings after the closing bell on Wednesday.
The chips / semiconductors are a major catalyst for the tech heavy Nasdaq and of course many of these companies are large enough to impact the S&P 500. If we looks at the Semiconductor Index ETF, SMH, we see that is has been trading in a clear range for the last 6 months or so. Looking at various timeframes, we can see that the 200 day moving average has been tested and held, for the most part, several times. Gaps have been opened and filled and...
... the weekly chart is still holding above long-term support, but if that 50-week moving average fails, there is a large void down to the 200-week average, so its hold now or the next punch could put it down for the count.
The Dow Transportation Index and the Russell 2000 are also flirting with major breakdowns. The Transports have been flirting with, but holding above, the 200-day moving average, and there had been very few closes below it, like we saw yesterday.
The Russell 2000 also closed below the 200-day moving average for the first time in a while. These are often warning signs, but also sometimes they are pushed down there by large institutions in order to take out the stop orders of smaller traders, only to have it reverse right back up. We should know rather quickly.
The bond market continues to see lower yields as the 10-year yield hit a new low for the year. This had been helping small caps but not recently as small caps continue to lag since the end of January.
The final 10 minutes of trading yesterday took the S&P 500 (C-fund) down below its 50-day EMA, after an early afternoon attempt to bounce back and retrace some of Friday's losses. After the February 3rd sell off failed to fill the open gap from January, it was looking like that gap was going to be left behind, but as we know, those gaps usually come back to haunt us, and here the index is at its lowest closing point since mid-January, with that gap potentially back in play. There is some support that could get tested today near 5970.
DWCPF (S-fund) has been clobbered in recent days and it has been filling in new and old gaps along the way. The 2230 and 2250 support areas being tested now, with the 200-day EMA floating below that at 2205.
ACWX (the I-fund tracking index) continues to buck the trend of US stocks. It was down yesterday but so far it has remained relatively close to the recent highs, and remains in an ascending trading channel with 55 looking like decent support.
BND (F-fund) is doing well and after yesterday's losses in stocks, it is now challenging the I-fund as the top performer in February. The good news is, lower yields probably means inflation is backing off again. The bad news is, the alternative is that the economy may be slowing.
Thanks so much for reading! We'll see you back here tomorrow.
Tom Crowley
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
Questions, comments, or issues with today's commentary? We can discuss it in the Forum.
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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 may use additional methods and strategies to determine fund positions.
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It looked like algorithm selling kicked very late on Monday in the broader indices once they went red in that final our of trading. It's always tough to trust a gap up open on a Monday after a weak Friday, so Monday's action wasn't too surprising, but given the lack of a catalyst, there was some optimism that Friday's overreaction to... something... would be reversed on Monday, but that was not to be.
So, it's now up to Turnaround Tuesday or, if the market is concerned about Nvidia's earnings, it could be a Thursday reaction as they report earnings after the closing bell on Wednesday.
The chips / semiconductors are a major catalyst for the tech heavy Nasdaq and of course many of these companies are large enough to impact the S&P 500. If we looks at the Semiconductor Index ETF, SMH, we see that is has been trading in a clear range for the last 6 months or so. Looking at various timeframes, we can see that the 200 day moving average has been tested and held, for the most part, several times. Gaps have been opened and filled and...
... the weekly chart is still holding above long-term support, but if that 50-week moving average fails, there is a large void down to the 200-week average, so its hold now or the next punch could put it down for the count.
The Dow Transportation Index and the Russell 2000 are also flirting with major breakdowns. The Transports have been flirting with, but holding above, the 200-day moving average, and there had been very few closes below it, like we saw yesterday.
The Russell 2000 also closed below the 200-day moving average for the first time in a while. These are often warning signs, but also sometimes they are pushed down there by large institutions in order to take out the stop orders of smaller traders, only to have it reverse right back up. We should know rather quickly.
The bond market continues to see lower yields as the 10-year yield hit a new low for the year. This had been helping small caps but not recently as small caps continue to lag since the end of January.
The final 10 minutes of trading yesterday took the S&P 500 (C-fund) down below its 50-day EMA, after an early afternoon attempt to bounce back and retrace some of Friday's losses. After the February 3rd sell off failed to fill the open gap from January, it was looking like that gap was going to be left behind, but as we know, those gaps usually come back to haunt us, and here the index is at its lowest closing point since mid-January, with that gap potentially back in play. There is some support that could get tested today near 5970.
DWCPF (S-fund) has been clobbered in recent days and it has been filling in new and old gaps along the way. The 2230 and 2250 support areas being tested now, with the 200-day EMA floating below that at 2205.
ACWX (the I-fund tracking index) continues to buck the trend of US stocks. It was down yesterday but so far it has remained relatively close to the recent highs, and remains in an ascending trading channel with 55 looking like decent support.
BND (F-fund) is doing well and after yesterday's losses in stocks, it is now challenging the I-fund as the top performer in February. The good news is, lower yields probably means inflation is backing off again. The bad news is, the alternative is that the economy may be slowing.
Thanks so much for reading! We'll see you back here tomorrow.
Tom Crowley
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
Questions, comments, or issues with today's commentary? We can discuss it in the Forum.
Daily Market Commentary Archives
For more info our other premium services, please go here... www.tsptalk.com/premiums.php
To get weekly or daily notifications when we post new commentary, sign up HERE.
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 may use additional methods and strategies to determine fund positions.
