It was a quarterly expiration day on Friday and the action was fairly narrow but we saw something odd happen for a change - the small caps led. The Dow hung onto a small gain but the 3% decline in Nvidia helped keep the S&P 500 and Nasdaq in the red on the day, although maybe not as much as we might have expected since Nvidia has been almost single-handedly keeping those two indices afloat.
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It has been Nvidia's show so far in 2024 and certainly over the last couple of months so Thursday's nasty negative reversal, and Friday's follow through on the down side could be the straw that finally gives the S&P 500 and Nasdaq a much needed break. This weekly chart of Nvidia shows that last week's action looks awfully similar to the weekly candlestick made at the March peak and it was the first negative week for the stock after 8 straight positive weeks. That Match reversal led to a 4-week pullback after 11 straight positive weeks starting in January, and ...
... as you see the S&P 500 also pulled back with it.
But something interesting happened late on Friday. The much beleaguered S-fund had an odd move higher in the final hour and also the final minutes of trading to end the week. It was likely due to the expiration trading that was going on, but the other indices didn't do this, so maybe something is going to finally change for the small caps?
Can small caps hold up if there is a pullback in tech, which will likely take the S&P 500 and Nasdaq with it? Or will the falling tech tide sink all boats?
Despite the red in many of the indices, we did see more stocks up on Friday than down, and that may have been due to the small caps' late push higher. The Nasdaq actually had a 5 to 4 positive trading volume advantage. But one nasty number in this chart is the 182 new 52-week lows on the Nasdaq on Friday. That's after the index made an all time high the day before. That's either an anomaly, or a warning, but it isn't the first time we saw this so I am concerned that it is a flashing warning sign.
The 10-year Treasury Yield was up slightly on Friday but it is still having a difficult time getting back above its 200-day EMA, so it remains in a downtrend. Good for stocks I suppose, but is it falling because of the improvement in inflation data, or because the economy is slowing - or both?
The dollar has broken out above a couple of levels of resistance as it remains relatively strong vs. the bond market. We haven't seen these moving in opposite directions like this in a while.
Even with a strengthening dollar, which tends to put pressure on prices, the price of oil has been blasting through resistance recently. Is this the summer driving season gouging, or is demand really increasing, which would be a good sign for the economy - but bad for consumers. If the dollar and oil continue higher, the stock market may not be too happy.
The Dow Transportation Index had a big reversal day about a week ago and it has since climbed higher, although it is testing some descending resistance. Again, this is generally considered the market leader and it has been leading in the wrong direction this year. That makes that long tailed reversal that much more intriguing.
The S&P 500 (C-fund) traded in a very narrow range for an expiration Friday, so there must have been a lot of big money options and futures contracts expiring in this 5450 - 5500 area. But now that the expiration has passed, we could find out which way this really wanted to go. The bears think the cracks have started, but the bulls may be looking to buy this pullback at the bottom of the red trading channel. Filling that open gap near 5370 wouldn't be the worst thing to happen because there is a lot of support in that area. Still, there is a lot of room below before this tests its 50-day EMA again.
DWCPF (S-fund) had some interestingly bullish action to end the day on Friday as we mentioned above, and it did break above that red descending trading channel earlier in the week, but it is still lingering below its 50-day EMA, and that wider blue trading channel is also descending. There's an opportunity for small caps here but they haven't been taking advantage of those recently.
The EFA (I-fund) has been slammed by the recent strength in the dollar. The new high in UUP pushed the EFA down near the bottom of its channel, but is that blue channel part of a large bull flag? There are open gaps above and below so neither direction would surprise me in the short-term.
BND (bonds / F-fund) has been hanging around the area of that large gap that was created back in February.
If we zoom out we see that it also happens to be near a triple top, which are not as stubborn as double tops. But will this fill those open gaps before trying to break out to new highs?
Thanks so much for reading! We'll see you back here tomorrow.
Tom Crowley
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
Questions, comments, or issues with today's commentary? We can discuss it in the Forum.
Daily Market Commentary Archives
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.
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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It has been Nvidia's show so far in 2024 and certainly over the last couple of months so Thursday's nasty negative reversal, and Friday's follow through on the down side could be the straw that finally gives the S&P 500 and Nasdaq a much needed break. This weekly chart of Nvidia shows that last week's action looks awfully similar to the weekly candlestick made at the March peak and it was the first negative week for the stock after 8 straight positive weeks. That Match reversal led to a 4-week pullback after 11 straight positive weeks starting in January, and ...
... as you see the S&P 500 also pulled back with it.
But something interesting happened late on Friday. The much beleaguered S-fund had an odd move higher in the final hour and also the final minutes of trading to end the week. It was likely due to the expiration trading that was going on, but the other indices didn't do this, so maybe something is going to finally change for the small caps?
Can small caps hold up if there is a pullback in tech, which will likely take the S&P 500 and Nasdaq with it? Or will the falling tech tide sink all boats?
Despite the red in many of the indices, we did see more stocks up on Friday than down, and that may have been due to the small caps' late push higher. The Nasdaq actually had a 5 to 4 positive trading volume advantage. But one nasty number in this chart is the 182 new 52-week lows on the Nasdaq on Friday. That's after the index made an all time high the day before. That's either an anomaly, or a warning, but it isn't the first time we saw this so I am concerned that it is a flashing warning sign.
The 10-year Treasury Yield was up slightly on Friday but it is still having a difficult time getting back above its 200-day EMA, so it remains in a downtrend. Good for stocks I suppose, but is it falling because of the improvement in inflation data, or because the economy is slowing - or both?
The dollar has broken out above a couple of levels of resistance as it remains relatively strong vs. the bond market. We haven't seen these moving in opposite directions like this in a while.
Even with a strengthening dollar, which tends to put pressure on prices, the price of oil has been blasting through resistance recently. Is this the summer driving season gouging, or is demand really increasing, which would be a good sign for the economy - but bad for consumers. If the dollar and oil continue higher, the stock market may not be too happy.
The Dow Transportation Index had a big reversal day about a week ago and it has since climbed higher, although it is testing some descending resistance. Again, this is generally considered the market leader and it has been leading in the wrong direction this year. That makes that long tailed reversal that much more intriguing.
The S&P 500 (C-fund) traded in a very narrow range for an expiration Friday, so there must have been a lot of big money options and futures contracts expiring in this 5450 - 5500 area. But now that the expiration has passed, we could find out which way this really wanted to go. The bears think the cracks have started, but the bulls may be looking to buy this pullback at the bottom of the red trading channel. Filling that open gap near 5370 wouldn't be the worst thing to happen because there is a lot of support in that area. Still, there is a lot of room below before this tests its 50-day EMA again.
DWCPF (S-fund) had some interestingly bullish action to end the day on Friday as we mentioned above, and it did break above that red descending trading channel earlier in the week, but it is still lingering below its 50-day EMA, and that wider blue trading channel is also descending. There's an opportunity for small caps here but they haven't been taking advantage of those recently.
The EFA (I-fund) has been slammed by the recent strength in the dollar. The new high in UUP pushed the EFA down near the bottom of its channel, but is that blue channel part of a large bull flag? There are open gaps above and below so neither direction would surprise me in the short-term.
BND (bonds / F-fund) has been hanging around the area of that large gap that was created back in February.
If we zoom out we see that it also happens to be near a triple top, which are not as stubborn as double tops. But will this fill those open gaps before trying to break out to new highs?
Thanks so much for reading! We'll see you back here tomorrow.
Tom Crowley
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
Questions, comments, or issues with today's commentary? We can discuss it in the Forum.
Daily Market Commentary Archives
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.
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.
