Stocks rallied on Tuesday as the the market rally isn't missing a beat despite the economic challenges and civil unrest going on around us. Most of those gains in the broader indices came in the final 30 minutes of trading yesterday after one Federal Reserve economist said getting the U.S. economy back to strong growth could require negative interest rates. The Dow gained 268-points as the mostly flat day turned into near 1% gain in many indices after that late rally.
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The bond ETFs also rallied very late, and that was after an hour after the bond market closed so the F-fund may not be exactly priced correctly, depending on how the TSP calculated it, and may need adjusted today.
I don't consider myself an "expect" by any means, but I've been doing this along time and understand technical analysis and some fundamentals, and the charts do look impressive now - although extended, but we just happen to be in a period where conventional wisdom has been thrown out, and as we've talked about before, it seems unemotional computer trading is pushing trends further than we are used to, and it is causing some havoc with small investors and traders who are unsure how to react. Many non believers are throwing in the towel and chasing the market higher, which is working now, but how healthy is that kind of investing?
I read an article on CNBC.com about the market acting in a similar fashion to 1968. That year America was dealing with the political assassinations of MLK and RFK, civil unrest, and the Hong Kong Flu, and the market also battled back from an early year decline to come back slowly and end the year with a 7% gain. That was also an election year.
There's no doubt that good things are happening to pull the country out of the economic mess that we out ourselves in, but as we've said before, racing toward the all time highs that we saw before the pandemic seems overzealous, especially given the fact that the market was already extremely overvalued by many historical measure back in February.
Yup, you've heard all of this before but every day we are given a choice on how to deal with it going forward. Do you jump in now and hope the rally continues? Do you wait for the inevitable 1-2 day dip which we have had a few times since the March lows? Or do we hold onto our precious IFT's (basically one opportunity to buy each month) for when this leg of the recover (blue channel) eventually breaks down - assuming it does?
And equally important for those who have been enjoying the fruits of this rally - when do you take profits? Do you sell high when things look good and buyers are willing to buy your shares at a hefty price? Or do you wait for the selling to begin and risk seeing prices move lower like they did in March.
The March selling was extreme and it may not happen like that again, but as the news gets more grim out there, the downside can be swift, especially when everyone tries to sell at the same time.
The May jobs report comes out on Friday and estimates are looking for a loss of 8.5 million jobs, and an unemployment rate of about 20%.
The S&P 500 (C-fund) is creeping higher, climbing that wall of worry, and continuing to baffle many of us. Perhaps we are going through another period like 1968, as I mentioned above. The market is unemotional, uncaring and, as Jim Cramer recently said, "has no conscience." It's going to do what it is going to do regardless of what's happening and what we think.
The DWCPF (S-fund) closed above the 200-day SMA for a second straight day, and continues to rise the rising support line.
The EFA (I-fund) finally moved above the 200-day EMA and is now it is looking up at the 200-day SMA and the top of a rising trading channel.
The dollar continues to drift lower, helping the I-fund. This week it has fallen below the 200-day EMA so the Fed's action on easy money is having a negative impact on the value of the dollar, as we might expect, and that can have a positive effect on U.S. stocks as well as the overseas markets So prices can go up in dollars, but the value doesn't necessarily change.
The weakness in the dollar tends to buoy other assets as well and we've seen some big rallies in gold, bitcoin, copper, and several other commodities, since the dollar peaked in March.
Just as an illustration, this chart shows the price of the S&P 500 measured in the price of a gram of gold. You can see the spike in the S&P off the lows in 2020, but that spike is not nearly the same as we see in dollars. That just reminds us that this is a Fed driven stock market rally. It still counts but inflation may become an issue, or you think it would, at some point.
As for technical analysis, you can see that there have been some long term support lines broken this year in the S&P 500 chart priced in gold, while the 2016 low was tested and held.
The BND (F-fund) rallied late to push the ETF up toward recent highs.
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
Thanks for reading. 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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[TD][/TD]
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The bond ETFs also rallied very late, and that was after an hour after the bond market closed so the F-fund may not be exactly priced correctly, depending on how the TSP calculated it, and may need adjusted today.
I don't consider myself an "expect" by any means, but I've been doing this along time and understand technical analysis and some fundamentals, and the charts do look impressive now - although extended, but we just happen to be in a period where conventional wisdom has been thrown out, and as we've talked about before, it seems unemotional computer trading is pushing trends further than we are used to, and it is causing some havoc with small investors and traders who are unsure how to react. Many non believers are throwing in the towel and chasing the market higher, which is working now, but how healthy is that kind of investing?
I read an article on CNBC.com about the market acting in a similar fashion to 1968. That year America was dealing with the political assassinations of MLK and RFK, civil unrest, and the Hong Kong Flu, and the market also battled back from an early year decline to come back slowly and end the year with a 7% gain. That was also an election year.
There's no doubt that good things are happening to pull the country out of the economic mess that we out ourselves in, but as we've said before, racing toward the all time highs that we saw before the pandemic seems overzealous, especially given the fact that the market was already extremely overvalued by many historical measure back in February.
Yup, you've heard all of this before but every day we are given a choice on how to deal with it going forward. Do you jump in now and hope the rally continues? Do you wait for the inevitable 1-2 day dip which we have had a few times since the March lows? Or do we hold onto our precious IFT's (basically one opportunity to buy each month) for when this leg of the recover (blue channel) eventually breaks down - assuming it does?
And equally important for those who have been enjoying the fruits of this rally - when do you take profits? Do you sell high when things look good and buyers are willing to buy your shares at a hefty price? Or do you wait for the selling to begin and risk seeing prices move lower like they did in March.
The March selling was extreme and it may not happen like that again, but as the news gets more grim out there, the downside can be swift, especially when everyone tries to sell at the same time.
The May jobs report comes out on Friday and estimates are looking for a loss of 8.5 million jobs, and an unemployment rate of about 20%.
The S&P 500 (C-fund) is creeping higher, climbing that wall of worry, and continuing to baffle many of us. Perhaps we are going through another period like 1968, as I mentioned above. The market is unemotional, uncaring and, as Jim Cramer recently said, "has no conscience." It's going to do what it is going to do regardless of what's happening and what we think.
The DWCPF (S-fund) closed above the 200-day SMA for a second straight day, and continues to rise the rising support line.
The EFA (I-fund) finally moved above the 200-day EMA and is now it is looking up at the 200-day SMA and the top of a rising trading channel.
The dollar continues to drift lower, helping the I-fund. This week it has fallen below the 200-day EMA so the Fed's action on easy money is having a negative impact on the value of the dollar, as we might expect, and that can have a positive effect on U.S. stocks as well as the overseas markets So prices can go up in dollars, but the value doesn't necessarily change.
The weakness in the dollar tends to buoy other assets as well and we've seen some big rallies in gold, bitcoin, copper, and several other commodities, since the dollar peaked in March.
Just as an illustration, this chart shows the price of the S&P 500 measured in the price of a gram of gold. You can see the spike in the S&P off the lows in 2020, but that spike is not nearly the same as we see in dollars. That just reminds us that this is a Fed driven stock market rally. It still counts but inflation may become an issue, or you think it would, at some point.
As for technical analysis, you can see that there have been some long term support lines broken this year in the S&P 500 chart priced in gold, while the 2016 low was tested and held.
The BND (F-fund) rallied late to push the ETF up toward recent highs.
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
Thanks for reading. 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.
