Stocks rallied on Thursday despite another weaker than expected jobless claims report. The Dow gained 323-points and the gains were fairly broad with the small caps having another big day. Weak data seems to keep the Fed away as far as having a reason to act. The dollar was down, as were yields, in a relatively quiet day that happened to have solid gains for stocks.
[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]
The stock market doesn't seemed concerned about a problem in the jobs market. As a matter of fact, investors embrace it. It means the Fed has one less reason to consider raising interest rates, and it could possibly keep them from tapering their bond buying. And that seems to be the main catalyst for stocks.
Yes, the market is coming out of its COVID recession funk, and the economy is growing quickly, but signs of overheating are more of a concern than the fact that, for a second straight week, there were more than 400,000 new jobless claims reported.
On the flip side of that, it could be good news that people are looking for work rather than continuing to rely on the government to provide a paycheck, which was part of the employment problem recently - too many positions opened for too few applicants.
Whatever it was, stocks continue to move higher, but JP Morgan came out with their year end target for the S&P 500 and it was 4400. Sounds like a big number but being at 4266 now, that's only a 3% move from here. Who knows if they're right or not, but as we'll see in some of the charts, the question is whether we get explosive breakouts after the long consolidations that were created in the charts in recent months, or if the indices continue to flounder in a range. If 4400 is the high end of the range perhaps this isn't a great set up for the second half of the year.
There seems to be some positive reaction to the next multi trillion dollar bill being worked on in congress, this one the infrastructure bill. They're patting themselves on the back about it being bipartisan, and while that's encouraging, it reminds us that very few in Washington are very concerned about the national debt. It doesn't seem to matter who is in the Whitehouse or who runs congress, the numbers continue to mount beyond any comprehension or any ability for it to ever be under control. It is now at 128% of GDP.
I only bring this up to shed light on the insanity of a market that is completely dependent on Federal reserve money, 0% interest rates, government spending, including stimulus, otherwise the indices would likely be selling off to level that would make us all panic. And they can't have that, so we all play the game.
There are fund managers like John Hussman of hussmanfunds.com that pound the table every month talking about how unsustainable it all is, but yet here we are seeing the stock market at all time highs again, and many buy and hold investors will likely follow it over a cliff... some day. And that's the question... when do we pay the piper? It may or may not be in our lifetime, but history will certainly look back at this time and wonder what we were thinking over the last 20+ years.
We have to play the cards we're being dealt. The market is performing well, perhaps over-extended and at the top of some large consolidation patterns which could either mean a trip back down near the bottom of those trading channel, or a breakout to new highs. And one of those will happen regardless, or in spite of, what is rational.
Sorry folks. I digress. I'm just in one of those moods when the market action has me a little off my game, and I try to justify it by imagining it is all rigged, or something. One doesn't have to look much further than those short-squeeze stocks like GME and AMC that are still up to astronomical valuations, to know there are games being played. Only in those two cases it is the little guy squeezing the big guys. Normally we're the ones being played, but it was reported that one hedge fund, London-based White Square Capital, went under because they were short Gamestop and it just kept going up.
The S&P 500 (C-fund) broke out to a new high, and the action was not tentative, although it did close slightly off the highs and below some rising resistance. It looks like a very bullish formation, but it's rare to see that PMO indicator below its moving average when the S&P is at a new high. Something doesn't seem right.
The DWCPF (S-fund) also broke out with some authority after a 1% gain on the day. The red lines represent the top and bottom of a very wide parallel trading channel, and that's a little concerning - if it continues to hold. There is more room on the upside before that red line gets tagged, but there's 200-points on the downside to the lower end, and the 200-day EMA is even below that.
I see a familiar pattern on the DWCPF chart between those parallel lines. Follow the progression from 1 to 7 from mid-March through the end of April, and compare it to the same 1 - 7 that started in Mid-May. One caveat; it always seems like once you identify a pattern, it is usually about to end.
The EFA (I-fund) had a big day as it moved high enough to fill that open gap yesterday. The dollar was down slightly, so that helped, but there are signs that the dollar may be ready for a more sustained rally, and that could cause some problems for the I-fund.
The Dow Transportation Index gained 0.53% yesterday so it seems to be consolidating over the last few trading sessions. FedEx was down over 4% afterhours after the bell yesterday after reporting earnings. Subsequently, IYT, the Transportation ETF, traded down 0.73% on the news afterhours, so the Transports could start the day under some pressure again.
BND (bonds / F-fund) was up slightly as yields slipped on the weaker than expected jobless claims report.
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. Have a great weekend!
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]
The stock market doesn't seemed concerned about a problem in the jobs market. As a matter of fact, investors embrace it. It means the Fed has one less reason to consider raising interest rates, and it could possibly keep them from tapering their bond buying. And that seems to be the main catalyst for stocks.
Yes, the market is coming out of its COVID recession funk, and the economy is growing quickly, but signs of overheating are more of a concern than the fact that, for a second straight week, there were more than 400,000 new jobless claims reported.
On the flip side of that, it could be good news that people are looking for work rather than continuing to rely on the government to provide a paycheck, which was part of the employment problem recently - too many positions opened for too few applicants.
Whatever it was, stocks continue to move higher, but JP Morgan came out with their year end target for the S&P 500 and it was 4400. Sounds like a big number but being at 4266 now, that's only a 3% move from here. Who knows if they're right or not, but as we'll see in some of the charts, the question is whether we get explosive breakouts after the long consolidations that were created in the charts in recent months, or if the indices continue to flounder in a range. If 4400 is the high end of the range perhaps this isn't a great set up for the second half of the year.
There seems to be some positive reaction to the next multi trillion dollar bill being worked on in congress, this one the infrastructure bill. They're patting themselves on the back about it being bipartisan, and while that's encouraging, it reminds us that very few in Washington are very concerned about the national debt. It doesn't seem to matter who is in the Whitehouse or who runs congress, the numbers continue to mount beyond any comprehension or any ability for it to ever be under control. It is now at 128% of GDP.
I only bring this up to shed light on the insanity of a market that is completely dependent on Federal reserve money, 0% interest rates, government spending, including stimulus, otherwise the indices would likely be selling off to level that would make us all panic. And they can't have that, so we all play the game.
There are fund managers like John Hussman of hussmanfunds.com that pound the table every month talking about how unsustainable it all is, but yet here we are seeing the stock market at all time highs again, and many buy and hold investors will likely follow it over a cliff... some day. And that's the question... when do we pay the piper? It may or may not be in our lifetime, but history will certainly look back at this time and wonder what we were thinking over the last 20+ years.
We have to play the cards we're being dealt. The market is performing well, perhaps over-extended and at the top of some large consolidation patterns which could either mean a trip back down near the bottom of those trading channel, or a breakout to new highs. And one of those will happen regardless, or in spite of, what is rational.
Sorry folks. I digress. I'm just in one of those moods when the market action has me a little off my game, and I try to justify it by imagining it is all rigged, or something. One doesn't have to look much further than those short-squeeze stocks like GME and AMC that are still up to astronomical valuations, to know there are games being played. Only in those two cases it is the little guy squeezing the big guys. Normally we're the ones being played, but it was reported that one hedge fund, London-based White Square Capital, went under because they were short Gamestop and it just kept going up.
The S&P 500 (C-fund) broke out to a new high, and the action was not tentative, although it did close slightly off the highs and below some rising resistance. It looks like a very bullish formation, but it's rare to see that PMO indicator below its moving average when the S&P is at a new high. Something doesn't seem right.
The DWCPF (S-fund) also broke out with some authority after a 1% gain on the day. The red lines represent the top and bottom of a very wide parallel trading channel, and that's a little concerning - if it continues to hold. There is more room on the upside before that red line gets tagged, but there's 200-points on the downside to the lower end, and the 200-day EMA is even below that.
I see a familiar pattern on the DWCPF chart between those parallel lines. Follow the progression from 1 to 7 from mid-March through the end of April, and compare it to the same 1 - 7 that started in Mid-May. One caveat; it always seems like once you identify a pattern, it is usually about to end.
The EFA (I-fund) had a big day as it moved high enough to fill that open gap yesterday. The dollar was down slightly, so that helped, but there are signs that the dollar may be ready for a more sustained rally, and that could cause some problems for the I-fund.
The Dow Transportation Index gained 0.53% yesterday so it seems to be consolidating over the last few trading sessions. FedEx was down over 4% afterhours after the bell yesterday after reporting earnings. Subsequently, IYT, the Transportation ETF, traded down 0.73% on the news afterhours, so the Transports could start the day under some pressure again.
BND (bonds / F-fund) was up slightly as yields slipped on the weaker than expected jobless claims report.
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. Have a great weekend!
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.
