Stocks tried to move higher yesterday but twice good sized rallies faded and the indices closed much closer to the lows of the day, than the high. The Dow gained 62-points, off the nearly 400-point gain it had midday. The late selling took the Nasdaq into negative territory, and small caps also lagged. Bonds were down and there was another big rally in the dollar. Earnings are being dissected and it feels like no one knows what to expect, or how to react after they come out.
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The rise in interest rates is certainly having an impact on the dollar which has been racing higher for a long time, and this puts pressure on the prices of anything that trades in dollars, and that's the idea of raising rates, to curb inflation, so even with the strength in the dollar, prices are going up in most things, except maybe in stocks right now.
This chart shows that the acceleration to the upside in the dollar starting in November of last year, was also the point where small caps (Russell 2000) peaked, and they've gone in opposite directions since.
The weekly chart of the S&P 500 is flirting with another major support level where a key moving average is intersecting with a long term rising support line. A move to 4000 would keep the down trend intact, but a bounce off 4200 could prove to be a double bottom low. It's testing a very key area right now.
There are a lot of problems with this chart and it is certainly bearish activity, but snap back rallies tend to come when things look their worse. Having that support hold near 4175 - 4200 will help and could determine if a bounce is a bottom or just another opportunity to sell.
The S&P 500 (C-fund) closed higher but made a slightly lower low and tested the March lows. So far it has held and that's what everyone is watching. 4150 has been the bottom of this year's range, and 4600 the top. It wouldn't be unusual to see the lows get broken as trading firms go after investors / traders' stops that are usual placed just below the previous low.
DWCPF (S-fund / small caps) couldn't even hold onto a gain yesterday and it may have been that big rally in the dollar. Larger global stocks are usually more impacted by a strong dollar, but as we pointed out above in the dollar / IWM chart, it's pretty clear it is putting pressure on these stocks.
The EFA (I-fund) is also heavily dependent on the dollar, but this one held onto some gains into the close - perhaps because the overseas markets closed with gains before the U.S. stocks sold off into the close.
BND (bonds / F-fund) resumed its downside after a 2-day rally. Typical bear market action for bonds.
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
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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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The indices gave up some decent early gains, but as is often the case, the futures were on the move after the bell when earnings started to come out. The S&P 500 futures were up about 8-points at the close yesterday, but an hour after earnings started to come out the futures were back up about 30, or about 22 above Wednesday's close so there is a chance of a positive open - which doesn't mean a whole lot in this kind of a market. Bargain hunters have their antennae up, but the bears are still aggressively selling rallies. Place your bets!
The early reaction to Facebook's (META) earnings was positive as they were trading up over 16% in the after hours session. Ironically, the report was not great, but it wasn't a disaster and this stock was down over 50% from late 2021, so it may just be some relief that it wasn't worse.
Same for PayPal. The numbers were mixed but this stock has been beaten down mercilessly lately. It's not the market mover of some of the other big tech stocks, but it is rallying about 2% on the mediocre numbers.
We'll get earnings after the bell from Apple and Amazon today, and those two may be the biggest catalyst of the 1st quarter earnings.The early reaction to Facebook's (META) earnings was positive as they were trading up over 16% in the after hours session. Ironically, the report was not great, but it wasn't a disaster and this stock was down over 50% from late 2021, so it may just be some relief that it wasn't worse.
Same for PayPal. The numbers were mixed but this stock has been beaten down mercilessly lately. It's not the market mover of some of the other big tech stocks, but it is rallying about 2% on the mediocre numbers.
The rise in interest rates is certainly having an impact on the dollar which has been racing higher for a long time, and this puts pressure on the prices of anything that trades in dollars, and that's the idea of raising rates, to curb inflation, so even with the strength in the dollar, prices are going up in most things, except maybe in stocks right now.
This chart shows that the acceleration to the upside in the dollar starting in November of last year, was also the point where small caps (Russell 2000) peaked, and they've gone in opposite directions since.
The weekly chart of the S&P 500 is flirting with another major support level where a key moving average is intersecting with a long term rising support line. A move to 4000 would keep the down trend intact, but a bounce off 4200 could prove to be a double bottom low. It's testing a very key area right now.
There are a lot of problems with this chart and it is certainly bearish activity, but snap back rallies tend to come when things look their worse. Having that support hold near 4175 - 4200 will help and could determine if a bounce is a bottom or just another opportunity to sell.
The S&P 500 (C-fund) closed higher but made a slightly lower low and tested the March lows. So far it has held and that's what everyone is watching. 4150 has been the bottom of this year's range, and 4600 the top. It wouldn't be unusual to see the lows get broken as trading firms go after investors / traders' stops that are usual placed just below the previous low.
DWCPF (S-fund / small caps) couldn't even hold onto a gain yesterday and it may have been that big rally in the dollar. Larger global stocks are usually more impacted by a strong dollar, but as we pointed out above in the dollar / IWM chart, it's pretty clear it is putting pressure on these stocks.
The EFA (I-fund) is also heavily dependent on the dollar, but this one held onto some gains into the close - perhaps because the overseas markets closed with gains before the U.S. stocks sold off into the close.
BND (bonds / F-fund) resumed its downside after a 2-day rally. Typical bear market action for bonds.
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.
