Stocks opened sharply lower on Monday morning but the dip buyers were at the ready and the fight that the bears put up early, turned into a retreat as the bulls won the battle. The Dow gained 151-points and it was a pretty good showing for the bulls considering that the dollar had a big day and actually broke above its recent down trend. That sent commodity prices lower, including the price of oil. Bonds were up as yields slid lower. The Transportation Index was down yesterday.
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The dollar may be something to keep an eye on. We talked about it a little last week but yesterday it broke its recent down trend and may be looking toward the previous highs. That may not seem all that important until you look at what the S&P 500 has been doing in relation to the dollar this year.
The biggest positive for the market right now may be just how many people believe that this rally is about to fail. It always seems to go further (up or down) than most of us believe is possible. But I bring out this 2008 chart again showing where we saw a similar rally to the one we are in right now, although this current one has now gone a little further than 15%. It's at about 18%.
Back then the S&P 500 chart moved above the previous highs (check), above the 200-day EMA (check), and ended after a 15% rally from low to high before rolling over again in the spring of 2008. And of course that was just the beginning of the bear market which went on for eight more months after this chart ends.
And the difference between those days, and the Covid crash bottom, was that the Fed was dropping interest rates like a rock down to 0%, and they did Quantitative Easing (QE) programs to make money cheap and easy to get.
Now, on top of the current and continuing rate hikes, Quantitative Tightening (QT) will start in September so unless the market is being pushed up by traders who plan to take profits, I don't see these gains holding all that much longer, but what do I know? Overall, markets are acting well and if you are nimble, you could be making money and hold onto it. Easier said than done because I sold most of my stock holdings weeks ago so I am missing most of this. The market rarely seems rational at any given time, but at some point it will make sense.
China has been in an economic slowdown and their July data has come up short of expectations. Their Central Bank jumped in yesterday and actually cut interest rates. I took a look at their Shanghai Index and noticed something interesting when compared to the S&P 500. The S&P has been lagging behind the Shanghai Index by about a month for the last year.
So, whether you buy into the story that the bottom is in, or that new lows are coming, we each place our bets and see how it plays out. In general the bulls have an advantage because over the long haul stocks have always moved higher, but the charts going back to the early 1900's have a lot of ups and downs so both investors and traders can make money. It's not fun missing out on a rally but there is something a little more sweet about not losing money when stocks go down, and I think there is a setup this late summer / fall for just that.
On Wednesday we'll get the release of the minutes from the recent FOMC meeting.
Like what you're seeing on TSP Talk? Why not tell a friend or co-worker about us? We'd really appreciate it, and they may too. Thanks!
The S&P 500 (C-fund) made it up to 4300 yesterday, going further than most thought the bear market rally could go. I don't know if it will be of any significance but yesterday's high actually filled an open gap on the chart - a gap that is not as obvious to see. It was made between the close on May 4th, which was 4300, and the high the next day on May 5th which was 4270. So yesterday's rally up to 4301 filled that gap. Possible peak? Just a maybe. There is still an open gap down at 4137.
The DWCPF (S-fund) lagged a bit but had a solid 0.22% gain yesterday. It has moved above some firm resistance but remains below the 200-day EMA and the May high. If I had to draw up a scenario, this would be a place where I would think a rally could end, but it's never that easy.
The EFA (I-fund) has made some improvements but with the dollar getting perky again, the overhead resistance near 67, and a large open gap down by 65, this chart could run into some trouble this week.
BND (Bonds / F-fund) was up modestly yesterday, closing near its lows of the day, but it seems to be creating a bullish looking flag above the 50-day EMA. I would say that this looks bullish for bonds unless or until it falls back below that 50-day EMA.
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. I appreciate it. 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 dollar may be something to keep an eye on. We talked about it a little last week but yesterday it broke its recent down trend and may be looking toward the previous highs. That may not seem all that important until you look at what the S&P 500 has been doing in relation to the dollar this year.
The biggest positive for the market right now may be just how many people believe that this rally is about to fail. It always seems to go further (up or down) than most of us believe is possible. But I bring out this 2008 chart again showing where we saw a similar rally to the one we are in right now, although this current one has now gone a little further than 15%. It's at about 18%.
Back then the S&P 500 chart moved above the previous highs (check), above the 200-day EMA (check), and ended after a 15% rally from low to high before rolling over again in the spring of 2008. And of course that was just the beginning of the bear market which went on for eight more months after this chart ends.
And the difference between those days, and the Covid crash bottom, was that the Fed was dropping interest rates like a rock down to 0%, and they did Quantitative Easing (QE) programs to make money cheap and easy to get.
Now, on top of the current and continuing rate hikes, Quantitative Tightening (QT) will start in September so unless the market is being pushed up by traders who plan to take profits, I don't see these gains holding all that much longer, but what do I know? Overall, markets are acting well and if you are nimble, you could be making money and hold onto it. Easier said than done because I sold most of my stock holdings weeks ago so I am missing most of this. The market rarely seems rational at any given time, but at some point it will make sense.
China has been in an economic slowdown and their July data has come up short of expectations. Their Central Bank jumped in yesterday and actually cut interest rates. I took a look at their Shanghai Index and noticed something interesting when compared to the S&P 500. The S&P has been lagging behind the Shanghai Index by about a month for the last year.
So, whether you buy into the story that the bottom is in, or that new lows are coming, we each place our bets and see how it plays out. In general the bulls have an advantage because over the long haul stocks have always moved higher, but the charts going back to the early 1900's have a lot of ups and downs so both investors and traders can make money. It's not fun missing out on a rally but there is something a little more sweet about not losing money when stocks go down, and I think there is a setup this late summer / fall for just that.
On Wednesday we'll get the release of the minutes from the recent FOMC meeting.
Like what you're seeing on TSP Talk? Why not tell a friend or co-worker about us? We'd really appreciate it, and they may too. Thanks!
The S&P 500 (C-fund) made it up to 4300 yesterday, going further than most thought the bear market rally could go. I don't know if it will be of any significance but yesterday's high actually filled an open gap on the chart - a gap that is not as obvious to see. It was made between the close on May 4th, which was 4300, and the high the next day on May 5th which was 4270. So yesterday's rally up to 4301 filled that gap. Possible peak? Just a maybe. There is still an open gap down at 4137.
The DWCPF (S-fund) lagged a bit but had a solid 0.22% gain yesterday. It has moved above some firm resistance but remains below the 200-day EMA and the May high. If I had to draw up a scenario, this would be a place where I would think a rally could end, but it's never that easy.
The EFA (I-fund) has made some improvements but with the dollar getting perky again, the overhead resistance near 67, and a large open gap down by 65, this chart could run into some trouble this week.
BND (Bonds / F-fund) was up modestly yesterday, closing near its lows of the day, but it seems to be creating a bullish looking flag above the 50-day EMA. I would say that this looks bullish for bonds unless or until it falls back below that 50-day EMA.
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. I appreciate it. 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.
