After a mini-breakout in the S&P 500 last week, stocks chopped around on Monday in a tight range, closing mixed but mostly positive. The Dow lost 140-points with retail, energy and large banks dragging the index down, while the S&P (C-fund) and the I-fund were flat, and the broader indices like the Nasdaq and small caps saw modest to strong gains. Bonds were flat to slightly lower as yields continue to rise.
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Yesterday I talked about the battle going on between the bearish economic story, and some very bullish chart setups. Monday's action hammered that home as the bulls and bears battled back and forth in a tight range and the S&P 500 closed flat in a quiet day of trading.
This is a 10-day chart, and yesterday the S&P 500 made its intraday high and intraday low in the first 30-minutes of trading, and after that it was back and forth within a very tight range as investors await news on the debt ceiling negotiations.
We did see some strength in small caps and tech, and even the Transports closed positive after some morning selling.
I wanted to focus on the small caps (S-fund) today and look at a daily, weekly, and monthly chart.
The DWCPF (S-fund) daily chart shows that it is trading near the top of a two month range and is currently banging its head on some overhead resistance, and closing in on the 200-day EMA just above that. It's has now closed above the 50-day EMA for three straight days. So, some good action, some questionable.
The weekly chart shows the severe drop off the all time highs back in late 2021, pushing it back down near the pre-COVID crash high. With double support near 1600, it actually looks like a possible good risk / reward situation if we used a move under 1600 as a stop (sell) area.
The monthly chart however, looks a little troubling, especially viewing the logarithmic chart where its more about percentages than points. The wide channel off the 2009 lows shows the index hanging out closer to the middle which could mean either side is viable. The problem is that the middle support line was broken last year and it has failed to close above that line ever since. And here it is less than 70 points away from breaking down from that bearish looking flag formation in blue. This is a really tough call looking out more than a week or so, but if we can stand some volatility, the longer term answer may be whether the chart gets above 1700, or below 1600 first.
With the onslaught of news that hints toward potential economic problems, including JP Morgan Chance CEO suggesting yesterday that interest rates will stay elevated for some time, this stock market refuses to cave. I look at this two possible ways:
The paranoid trader in me sees this as a possible set up to drag more bearish folks into the stock market before "they", whoever they are, pull the rug out from under it again. It could happen. Could be the debt ceiling, high interest rates, recession, etc.
The other side of me see the charts improving suggesting that the market, with its millions of participants and trillions of assets, is telling us a story that most of us haven't seen or heard yet, but perhaps 3, 6 or 12 months from now we'll be saying, "Oh, yeah. That's why it was going up."
The market is in general a forward looking indicator rather than a rearview mirror observer. Right now many parts of the market are pointing toward good things happening ahead. Again, that could change with a breakdown of support or a major negative geopolitical event, etc., but if these recent breakouts in the S&P 500, Nasdaq, and the Dow - as well as the I-fund, are not a trap, then the mastermind of the market as a whole is trying to tell us something positive.
The S&P 500 (C-fund) was flat yesterday and it is still hanging around some recent peaks, but until this clears 4200 it may be tough to get new money into the market. That may be why it was so quiet yesterday. A deal on the debt ceiling could be the catalyst for either a breakout, or a double top breakdown. There's also the possibility of an initial rally after a deal, but a quick sell the news reaction as the market climbs this wall of worry leading up to the deadline. As I said above, it's a good looking chart, but a failure here and drop below support could change the story so I am optimistic, but keeping an open mind to a possible negative outcome as well.
The EFA (I-fund) has been in a sideways consolidation as it digests the massive bullish move off the March lows. The bears have not been able to push this down so the longer it hangs around, the better the chances that the bulls get a second wind and make another move.
BND (Bonds / F-fund) was flat yesterday but remains below broken support. However, the longer term chart shows that the bulls are trying to hold onto some rising support in the 72.60 area.
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 so much 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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[TD="width: 338, align: center"] Daily TSP Funds Return
[TR]
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[/TR]
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[/TD]
[/TR]
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Yesterday I talked about the battle going on between the bearish economic story, and some very bullish chart setups. Monday's action hammered that home as the bulls and bears battled back and forth in a tight range and the S&P 500 closed flat in a quiet day of trading.
This is a 10-day chart, and yesterday the S&P 500 made its intraday high and intraday low in the first 30-minutes of trading, and after that it was back and forth within a very tight range as investors await news on the debt ceiling negotiations.
We did see some strength in small caps and tech, and even the Transports closed positive after some morning selling.
I wanted to focus on the small caps (S-fund) today and look at a daily, weekly, and monthly chart.
The DWCPF (S-fund) daily chart shows that it is trading near the top of a two month range and is currently banging its head on some overhead resistance, and closing in on the 200-day EMA just above that. It's has now closed above the 50-day EMA for three straight days. So, some good action, some questionable.
The weekly chart shows the severe drop off the all time highs back in late 2021, pushing it back down near the pre-COVID crash high. With double support near 1600, it actually looks like a possible good risk / reward situation if we used a move under 1600 as a stop (sell) area.
The monthly chart however, looks a little troubling, especially viewing the logarithmic chart where its more about percentages than points. The wide channel off the 2009 lows shows the index hanging out closer to the middle which could mean either side is viable. The problem is that the middle support line was broken last year and it has failed to close above that line ever since. And here it is less than 70 points away from breaking down from that bearish looking flag formation in blue. This is a really tough call looking out more than a week or so, but if we can stand some volatility, the longer term answer may be whether the chart gets above 1700, or below 1600 first.
With the onslaught of news that hints toward potential economic problems, including JP Morgan Chance CEO suggesting yesterday that interest rates will stay elevated for some time, this stock market refuses to cave. I look at this two possible ways:
The paranoid trader in me sees this as a possible set up to drag more bearish folks into the stock market before "they", whoever they are, pull the rug out from under it again. It could happen. Could be the debt ceiling, high interest rates, recession, etc.
The other side of me see the charts improving suggesting that the market, with its millions of participants and trillions of assets, is telling us a story that most of us haven't seen or heard yet, but perhaps 3, 6 or 12 months from now we'll be saying, "Oh, yeah. That's why it was going up."
The market is in general a forward looking indicator rather than a rearview mirror observer. Right now many parts of the market are pointing toward good things happening ahead. Again, that could change with a breakdown of support or a major negative geopolitical event, etc., but if these recent breakouts in the S&P 500, Nasdaq, and the Dow - as well as the I-fund, are not a trap, then the mastermind of the market as a whole is trying to tell us something positive.
The S&P 500 (C-fund) was flat yesterday and it is still hanging around some recent peaks, but until this clears 4200 it may be tough to get new money into the market. That may be why it was so quiet yesterday. A deal on the debt ceiling could be the catalyst for either a breakout, or a double top breakdown. There's also the possibility of an initial rally after a deal, but a quick sell the news reaction as the market climbs this wall of worry leading up to the deadline. As I said above, it's a good looking chart, but a failure here and drop below support could change the story so I am optimistic, but keeping an open mind to a possible negative outcome as well.
The EFA (I-fund) has been in a sideways consolidation as it digests the massive bullish move off the March lows. The bears have not been able to push this down so the longer it hangs around, the better the chances that the bulls get a second wind and make another move.
BND (Bonds / F-fund) was flat yesterday but remains below broken support. However, the longer term chart shows that the bulls are trying to hold onto some rising support in the 72.60 area.
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 so much 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.
