A combination of a better than expected jobs report and a healthy earnings report from Apple triggered a massive rally on Friday to help repair a month that had gotten off to a very poor start. The Dow gained 547-points on the day and small caps led the way with a 2.23% gain. Bonds were down sharply as the stronger than expected jobs report pushed yields higher. It may get the Fed a little more hawkish, but the next FOMC meeting still is more than 5 weeks away.
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The jobs report was released on Friday and 253,000 jobs were added in April and the unemployment rate dropped to 3.4%. Expectations were for just under 200,000 and 3.6%, and hourly wages also beat estimates, so this was a beat and many might have thought stocks would fall under this hot report as the Fed has still not seen much of a slowdown in the labor market. But perhaps the expectation of the Fed stopping their interest rate hikes, combined with strong economic data is also pricing in a soft landing for the economy and reduced expectations for a recession.
I'm a little surprise that we didn't see more of a move in the Fed Funds target rate probabilities after that strong jobs report. TommyIV talked about this more in the Weekly Wrap-Up over the weekend. The Funambulist - The Market's Balancing Act
The bond market saw the jobs data as strong with yields moving higher (bond prices lower), and after Thursday's decline in yields filled that open gap during the head test of the inverted head and shoulders pattern, it managed to rally back above the 200-day EMA. I don't know if higher yields will help the stock market going forward, but the stock market didn't seem to mind it on Friday.
The dollar pulled back after retesting the top of that channel on Friday, and that was on the heals of a failed move above the 50-day EMA.
Two of the market leaders, the Dow Transportation Index and the Russell 2000 small caps, are still struggling compared to the S&P 500 and Nasdaq charts. Both remain below solid resistance, but as I will point out in the DWCPF / S-fund chart down below in the fund chart section, there are odd looking, slanted inverted head and shoulders patterns on these charts. I'll talk more about H&S patterns below.
One of the best looking charts out there is the Nasdaq. That is a cup and handle formation - one of the more reliable bullish patterns. Big tech reported earnings over the last couple of weeks and they were mostly good and beat estimates, so why didn't the tech index break out yet? The resistance is still holding so this week will be very important. The bears will try to hold it as this resistance line, but C&H patterns do tend to break out to the upside, and this one has been consolidating for three months.
The semiconductors have been consolidating in a head and shoulders pattern. I've mentioned this many times before but to avoid confusion -- head and shoulders patterns are actually continuation patterns. That is, they tend to break in the direction of the prevailing trend before the H&S was created. In the case of the $SOX, that was up. So while H&S patterns can look troublesome, in an uptrend, the neckline has a better chance of holding.
The Volatility Index (VIX) spiked higher on Thursday but since then it has come straight down into the 17's again, and even made it into the 16's at one point on Friday. This is making a large head and shoulder pattern. Unlike the head and shoulders pattern on the $SOX chart above, which was being formed in an ascending trend, this is in a downtrend and, being a continuation pattern, head and shoulders are much more likely to break down when in a downtrend.
One of our forum members posted this is the forum last week. For those of you have have been concerned about the changes that were made to the Thrift Saving Plan website last year, and some ongoing issues, here is a link to an open letter to the Federal Retirement Thrift Investment Board from Dan Jamison, CPA. https://www.barfieldfinancial.com/n...-thrift-investment-board-from-dan-jamison-cpa. Pass it on.
The S&P 500 (C-fund) exploded off the Apple earnings and jobs report and the 50-day EMA seems to be holding for a second time. The open gap remains open, so the bulls have to keep looking back at that, but the chart is improving, and after a second double top pullback and a 5-week sideways consolidation, has it built up enough strength to finally break out? Trading volume was surprising very light on Friday, so that's a little concerning. Was the big money sitting this one out for some reason? That big candlestick on Friday will likely deal with some retracing at some point, but the key will be if the recent lows near 4050 hold.
DWCPF (S-fund) has been in a steady, firm, downtrend and Friday's big rally brought it right back up to that resistance line. I mentioned the similar slanted inverted head and shoulders pattern above on the Transports and Russell 2000 charts. Again, head and shoulders pattern are continuation patterns, so with the odd looking one forming here coming out of the January rally (which actually started in October) we might expect this to break out to the upside. But can we count on this working that way with that slanted formation, or will resistance continue to hold?
The EFA (I-fund) closed at a new high for the year after Friday's rally. There are so many open gaps below that it makes it tough to not worry about that, but getting a new high, albeit just slightly, after successfully testing the February peak on the last pullback, it looks like it wants to go higher. How and why, I don't know, but that's what the chart is trying to tell us.
BND (Bonds / F-fund) pulled back on Friday as yields moved higher on the stronger than expected jobs data. Here's another head and shoulders pattern coming off an ascending trend so it's not as bearish as it appears. Plus that small red head and shoulders is actually within the right shoulder of a large inverted head and shoulders pattern, which is also coming off an ascending trending market.
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 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 jobs report was released on Friday and 253,000 jobs were added in April and the unemployment rate dropped to 3.4%. Expectations were for just under 200,000 and 3.6%, and hourly wages also beat estimates, so this was a beat and many might have thought stocks would fall under this hot report as the Fed has still not seen much of a slowdown in the labor market. But perhaps the expectation of the Fed stopping their interest rate hikes, combined with strong economic data is also pricing in a soft landing for the economy and reduced expectations for a recession.
I'm a little surprise that we didn't see more of a move in the Fed Funds target rate probabilities after that strong jobs report. TommyIV talked about this more in the Weekly Wrap-Up over the weekend. The Funambulist - The Market's Balancing Act
The bond market saw the jobs data as strong with yields moving higher (bond prices lower), and after Thursday's decline in yields filled that open gap during the head test of the inverted head and shoulders pattern, it managed to rally back above the 200-day EMA. I don't know if higher yields will help the stock market going forward, but the stock market didn't seem to mind it on Friday.
The dollar pulled back after retesting the top of that channel on Friday, and that was on the heals of a failed move above the 50-day EMA.
Two of the market leaders, the Dow Transportation Index and the Russell 2000 small caps, are still struggling compared to the S&P 500 and Nasdaq charts. Both remain below solid resistance, but as I will point out in the DWCPF / S-fund chart down below in the fund chart section, there are odd looking, slanted inverted head and shoulders patterns on these charts. I'll talk more about H&S patterns below.
One of the best looking charts out there is the Nasdaq. That is a cup and handle formation - one of the more reliable bullish patterns. Big tech reported earnings over the last couple of weeks and they were mostly good and beat estimates, so why didn't the tech index break out yet? The resistance is still holding so this week will be very important. The bears will try to hold it as this resistance line, but C&H patterns do tend to break out to the upside, and this one has been consolidating for three months.
The semiconductors have been consolidating in a head and shoulders pattern. I've mentioned this many times before but to avoid confusion -- head and shoulders patterns are actually continuation patterns. That is, they tend to break in the direction of the prevailing trend before the H&S was created. In the case of the $SOX, that was up. So while H&S patterns can look troublesome, in an uptrend, the neckline has a better chance of holding.
The Volatility Index (VIX) spiked higher on Thursday but since then it has come straight down into the 17's again, and even made it into the 16's at one point on Friday. This is making a large head and shoulder pattern. Unlike the head and shoulders pattern on the $SOX chart above, which was being formed in an ascending trend, this is in a downtrend and, being a continuation pattern, head and shoulders are much more likely to break down when in a downtrend.
One of our forum members posted this is the forum last week. For those of you have have been concerned about the changes that were made to the Thrift Saving Plan website last year, and some ongoing issues, here is a link to an open letter to the Federal Retirement Thrift Investment Board from Dan Jamison, CPA. https://www.barfieldfinancial.com/n...-thrift-investment-board-from-dan-jamison-cpa. Pass it on.
The S&P 500 (C-fund) exploded off the Apple earnings and jobs report and the 50-day EMA seems to be holding for a second time. The open gap remains open, so the bulls have to keep looking back at that, but the chart is improving, and after a second double top pullback and a 5-week sideways consolidation, has it built up enough strength to finally break out? Trading volume was surprising very light on Friday, so that's a little concerning. Was the big money sitting this one out for some reason? That big candlestick on Friday will likely deal with some retracing at some point, but the key will be if the recent lows near 4050 hold.
DWCPF (S-fund) has been in a steady, firm, downtrend and Friday's big rally brought it right back up to that resistance line. I mentioned the similar slanted inverted head and shoulders pattern above on the Transports and Russell 2000 charts. Again, head and shoulders pattern are continuation patterns, so with the odd looking one forming here coming out of the January rally (which actually started in October) we might expect this to break out to the upside. But can we count on this working that way with that slanted formation, or will resistance continue to hold?
The EFA (I-fund) closed at a new high for the year after Friday's rally. There are so many open gaps below that it makes it tough to not worry about that, but getting a new high, albeit just slightly, after successfully testing the February peak on the last pullback, it looks like it wants to go higher. How and why, I don't know, but that's what the chart is trying to tell us.
BND (Bonds / F-fund) pulled back on Friday as yields moved higher on the stronger than expected jobs data. Here's another head and shoulders pattern coming off an ascending trend so it's not as bearish as it appears. Plus that small red head and shoulders is actually within the right shoulder of a large inverted head and shoulders pattern, which is also coming off an ascending trending market.
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 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.
