Stocks started the new week with another moderate gain, keeping the recent rebound going. There was an afternoon scare from the bond market that caused a brief sell off, but the bulls didn't waste time and bought it and pushed prices right back toward the highs of the day by the close. The Dow gained 146-points and bond yields were down helping small caps lead on the upside.
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In technical analysis you have to be flexible. The market always has a catalyst and if it's not fundamental in nature, it's technical. Right now the market is focused on interest rates and yields, as it often is, but there are many other catalysts that could change things like the price of oil, the dollar, China, earnings, etc. But when it comes to technical analysis it's the same thing - it changes, and you have to find what is working at any given time.
Those who have been reading these commentary regularly may have noticed that I have been mentioning the 15-day EMA on the S&P 500 this year. That's something I have hardly ever used prior to this year, but in 2024 it was a great source of support for the index.
Sometimes it's the 50-day simple moving average that works, sometimes it's exponential moving averages, which are calculated differently. But just find what works, and even though it is mostly a self-fulfilling prophesy as many traders may be using that average, it doesn't mean it isn't working or doing it's job of giving us useful information.
What has been working most recently is following the action from the August 2023 pullback. I know I keep mentioning it but it's actually getting better and I will use it until it stops working, just like the moving averages, yields, or whatever is working at any given time.
Besides the obvious (to me) similarities between the two charts, I noticed that the pullback at the end of July 2023 started basically just as the calendar was switching to August. The low of the pullback was near the 100-day EMA, but that was also the options expiration Friday in August. Then the S&P rallied up to September 1st when it ran out of steam and the pullback started to convert into an eventual full blown correction.
Also, the PMO indicator started to cross back above its moving average right about the time the rebound was through.
I really don't have to say much here as the chart tells the same story except we're using April and May this time. The low of the pullback was options expiration Friday in April, and the PMO indicator is getting ready to touch its moving average from below.
Now, whether that leads to the same result, I have no idea, but it is difficult to ignore and until the similarities end, I will be watch the two charts closely. Not that I want this to happen. It's tough to make money in a down market, but not losing money in a bearish market is almost as satisfying as making money in a bullish market.
The 10-year Treasury Yield was down yesterday and what this relief rally in the stock market needs is for the 4.7x% area to be some kind of peak in the short-term. If the yields take it up a notch and we start seeing 4.8% or higher on the 10-year, you can bet that stocks won't be happy. There's support coming from below that is basically being tested now, and there is an open gap in that red box which is below that rising support.
Again, it's a really busy week full of catalysts including Mag 7 earnings (Amazon tonight and Apple Thursday night), a Fed meeting on Wednesday and the April jobs report. The market may be nearing a pivot point, which is either that the rebound off the pullback lows is coming to an end, or we will start seeing the 2024 highs get tested again. This week may help give us that answer.
Here's the S&P 500 (C-fund) chart again which I have obviously likened to the summer of 2023 chart. This one shows the 50-day simple moving average in green, and you can see yesterday's high hit it, and stopped it. That doesn't mean it won't go through it today, but there's more resistance in the 5150 area just above that. It did pop above the descending resistance line yesterday. There is an open gap down near the 5050 - 5060 area.
DWCPF (S-fund) is battling resistance now as well, where the March low and the descending resistance line are meeting, plus the 50-day EMA is in the same area. If this is going to fill the open gap by 2040 then it has some work to do here and now to get back above 2000.
EFA (I-fund) is also testing some key resistance as it is back near where it broke down earlier this month. Often broken support can act as resistance on the way back up.
BND (Bonds / F-fund) had a good day and that bear flag I was talking about last week has tried to turn into a double bottom as the April 16 low held when tested last week.
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
For more info our other premium services, please go here... www.tsptalk.com/premiums.html
Daily Market Commentary Archives
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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[TD="width: 284, align: center"] Daily TSP Funds Return
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[/TR]
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In technical analysis you have to be flexible. The market always has a catalyst and if it's not fundamental in nature, it's technical. Right now the market is focused on interest rates and yields, as it often is, but there are many other catalysts that could change things like the price of oil, the dollar, China, earnings, etc. But when it comes to technical analysis it's the same thing - it changes, and you have to find what is working at any given time.
Those who have been reading these commentary regularly may have noticed that I have been mentioning the 15-day EMA on the S&P 500 this year. That's something I have hardly ever used prior to this year, but in 2024 it was a great source of support for the index.
Sometimes it's the 50-day simple moving average that works, sometimes it's exponential moving averages, which are calculated differently. But just find what works, and even though it is mostly a self-fulfilling prophesy as many traders may be using that average, it doesn't mean it isn't working or doing it's job of giving us useful information.
What has been working most recently is following the action from the August 2023 pullback. I know I keep mentioning it but it's actually getting better and I will use it until it stops working, just like the moving averages, yields, or whatever is working at any given time.
Besides the obvious (to me) similarities between the two charts, I noticed that the pullback at the end of July 2023 started basically just as the calendar was switching to August. The low of the pullback was near the 100-day EMA, but that was also the options expiration Friday in August. Then the S&P rallied up to September 1st when it ran out of steam and the pullback started to convert into an eventual full blown correction.
Also, the PMO indicator started to cross back above its moving average right about the time the rebound was through.
I really don't have to say much here as the chart tells the same story except we're using April and May this time. The low of the pullback was options expiration Friday in April, and the PMO indicator is getting ready to touch its moving average from below.
Now, whether that leads to the same result, I have no idea, but it is difficult to ignore and until the similarities end, I will be watch the two charts closely. Not that I want this to happen. It's tough to make money in a down market, but not losing money in a bearish market is almost as satisfying as making money in a bullish market.
The 10-year Treasury Yield was down yesterday and what this relief rally in the stock market needs is for the 4.7x% area to be some kind of peak in the short-term. If the yields take it up a notch and we start seeing 4.8% or higher on the 10-year, you can bet that stocks won't be happy. There's support coming from below that is basically being tested now, and there is an open gap in that red box which is below that rising support.
Again, it's a really busy week full of catalysts including Mag 7 earnings (Amazon tonight and Apple Thursday night), a Fed meeting on Wednesday and the April jobs report. The market may be nearing a pivot point, which is either that the rebound off the pullback lows is coming to an end, or we will start seeing the 2024 highs get tested again. This week may help give us that answer.
Here's the S&P 500 (C-fund) chart again which I have obviously likened to the summer of 2023 chart. This one shows the 50-day simple moving average in green, and you can see yesterday's high hit it, and stopped it. That doesn't mean it won't go through it today, but there's more resistance in the 5150 area just above that. It did pop above the descending resistance line yesterday. There is an open gap down near the 5050 - 5060 area.
DWCPF (S-fund) is battling resistance now as well, where the March low and the descending resistance line are meeting, plus the 50-day EMA is in the same area. If this is going to fill the open gap by 2040 then it has some work to do here and now to get back above 2000.
EFA (I-fund) is also testing some key resistance as it is back near where it broke down earlier this month. Often broken support can act as resistance on the way back up.
BND (Bonds / F-fund) had a good day and that bear flag I was talking about last week has tried to turn into a double bottom as the April 16 low held when tested last week.
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
For more info our other premium services, please go here... www.tsptalk.com/premiums.html
Daily Market Commentary Archives
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.
