It was a reversal kind of day on Tuesday as what had been up, came down, and what was down, popped up. Stocks did well although some late selling pulled the indices off their best levels of the day after many charts were pressing on overhead resistance. The Dow gave up a 300-point gain to close up just 30. The S-fund led on the upside for the TSP funds with an impressive 2.5% gain.
[TABLE="align: center"]
[TR]
[TD="align: center"] Daily TSP Funds Return
[TABLE="align: center"]
[TR]
[TD="align: right"][/TD]
[/TR]
[/TABLE]
[/TD]
[TD]
[/TD]
[TD="width: 362, align: center"]
[/TD]
[/TR]
[/TABLE]
Recently beaten down bonds, gold, small caps, and the Nasdaq had a big day yesterday reversing to the upside. The yield on the 10-year Treasury, the dollar, and even oil, which had been rising steadily, were all down on the day.
The stimulus bill is signed and being delivered to the President so the market may be bouncing in anticipation of the inevitable at this point, but will may be short-lived, or is it already priced?
I talked about HYG being a red flag in yesterday's commentary, and Tuesday's action did little to ease my concerns. It's odd to see such a disparity between stocks and this fund, but clearly there is some kind of negative divergence going on here in this High Yield Bond Fund, which is a pulse of the credit markets. It needs to bounce, and it probably needs to bounce soon, or the stock market is not going to like it.
Combine that with some stubborn resistance at yesterday's highs (see charts section below) and today could be a good indicator for what the next move is going to be. A breakout above yesterday's highs could be smooth sailing for a few days. But if that resistance is persistent, the bears may come growling back.
The S&P 500 (C-fund) gave us a near breakout of what could be considered some kind of bull flag, but those reversal patterns, which are bullish when they stick out below, can be dangerous when they are sticking out on the upside like we saw yesterday. But yesterday's rally was quite strong and I suppose I need to be a little patient before calling a 1.4% gain bearish.
The DWCPF (small caps / S-fund) had another big move, as we have seen in both directions recently. I didn't like to see that 20-day EMA hold as resistance, but that isn't uncommon on the first test on the way back up from a pullback below it. That formation is looking like bull flag, like on the S&P chart above, but it's actually closer to a descending megaphone pattern, which can be equally bullish as they tend to break to the upside. It just doesn't have to do it on this test right now. It could always pullback again and come back at a later date. No prediction. I'm just saying that it could fail here, but that doesn't mean it wouldn't come right back for another test.
The EFA (I-fund) rallied and the dollar fell helping the chart to break above that short-term resistance line. The 50-day EMA holding repeatedly is a bullish sign.
The Dow Transportation Index make another new high with a solid 0.48% gain, but that's two negative reversal days in a row here, and you can see that they can lead to further downside. That old resistance line is now a key make or break area for the recent breakout.
The Volatility Index traded between the red rising support line, which held again, and the 200-day EMA , which also held for the first time in a week or so.
The BND (bonds / F-fund) got a small relief rally yesterday with those yields coming down. The downtrend is still intact but at least it moved back above that February low. Nothing new here yet. A move above that descending resistance line would be a new development.
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 positions.
[TABLE="align: center"]
[TR]
[TD="align: center"] Daily TSP Funds Return
[TR]
[TD="align: right"][/TD]
[/TR]
[/TABLE]
[/TD]
[TD]
[/TD]
[TD="width: 362, align: center"]
[/TR]
[/TABLE]
Recently beaten down bonds, gold, small caps, and the Nasdaq had a big day yesterday reversing to the upside. The yield on the 10-year Treasury, the dollar, and even oil, which had been rising steadily, were all down on the day.
The stimulus bill is signed and being delivered to the President so the market may be bouncing in anticipation of the inevitable at this point, but will may be short-lived, or is it already priced?
I talked about HYG being a red flag in yesterday's commentary, and Tuesday's action did little to ease my concerns. It's odd to see such a disparity between stocks and this fund, but clearly there is some kind of negative divergence going on here in this High Yield Bond Fund, which is a pulse of the credit markets. It needs to bounce, and it probably needs to bounce soon, or the stock market is not going to like it.
Combine that with some stubborn resistance at yesterday's highs (see charts section below) and today could be a good indicator for what the next move is going to be. A breakout above yesterday's highs could be smooth sailing for a few days. But if that resistance is persistent, the bears may come growling back.
The S&P 500 (C-fund) gave us a near breakout of what could be considered some kind of bull flag, but those reversal patterns, which are bullish when they stick out below, can be dangerous when they are sticking out on the upside like we saw yesterday. But yesterday's rally was quite strong and I suppose I need to be a little patient before calling a 1.4% gain bearish.
The DWCPF (small caps / S-fund) had another big move, as we have seen in both directions recently. I didn't like to see that 20-day EMA hold as resistance, but that isn't uncommon on the first test on the way back up from a pullback below it. That formation is looking like bull flag, like on the S&P chart above, but it's actually closer to a descending megaphone pattern, which can be equally bullish as they tend to break to the upside. It just doesn't have to do it on this test right now. It could always pullback again and come back at a later date. No prediction. I'm just saying that it could fail here, but that doesn't mean it wouldn't come right back for another test.
The EFA (I-fund) rallied and the dollar fell helping the chart to break above that short-term resistance line. The 50-day EMA holding repeatedly is a bullish sign.
The Dow Transportation Index make another new high with a solid 0.48% gain, but that's two negative reversal days in a row here, and you can see that they can lead to further downside. That old resistance line is now a key make or break area for the recent breakout.
The Volatility Index traded between the red rising support line, which held again, and the 200-day EMA , which also held for the first time in a week or so.
The BND (bonds / F-fund) got a small relief rally yesterday with those yields coming down. The downtrend is still intact but at least it moved back above that February low. Nothing new here yet. A move above that descending resistance line would be a new development.
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 positions.
