Stocks made it 15 straight positive Mondays. I know, who cares about that? Well short-term traders are probably all over it and it could be feeding upon itself. This was no squeaker either. Most of the major indices were up 1% to 2% and only the Dow came up a little short of 1%. Yields were up, which is a new dynamic since the stocks market had been shuttering at the sight of higher bond yields. The dollar was down, and that helped.
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There were no new major headlines yesterday although the selling on Friday may have had something to do with investors concerned about a possible escalation of the Israel / Hamas war over the weekend, and there were no major developments, so they may have bought back in. Just speculation, of course. This isn't the place to discuss what's going on over there but we do have to keep up with the headlines as it pertains to the financial markets. That's not a pleasant thought, but it's the reality of it, and believe me the big financial institutions are watching it closely. The fact that oil was down yesterday may have been the sigh of relief that gave investors the green light to buy.
It was an interesting rally for the stocks market and it wasn't because yields were higher. It was despite the rally in yields, and the talk is that higher yields at this point, with Fed very possibly on hold on interest rate hikes, is because economic growth projections are getting much better lately.
The dollar was down and that helped the indices rally yesterday, and here it is again testing the lower end of a very long ascending trading channel.
Keep an eye on HYG or JNK because these High Yield Corporate Bond Funds were down slightly yesterday so they did not participate in yesterday's rally, and that's a warnings sign. They could catch up today, but as of right now, it has me a little concerned. The stock market probably cannot sustain a rally if there's signs of trouble in the credit market.
With that short-term warning out of the way, the longer term has some potential bright spots. Four charts, the S&P 500 (SPY), the Nasdaq 100 (QQQ), Microsoft, and Apple all have impressive cup and handle formations. These are bullish formations. The caveat is that the handles have not broken to the upside yet and we don't know how long they could get before they do so, if and when they do breakout. The upside target would be extremely higher than they are now -- if they play out as C&H formations tend to.
A couple of the market leaders are still struggling, but both the Dow Transportation Index and the Russell 2000 small caps index rallied sharply yesterday. The Transports ran up to the 50-day EMA and the top of what could be an ugly bear flag, although it did manage to close back above its 200-day EMA. I give these mixed reviews, leaning on the bearish side, just because of the longer negative trends.
The Russell 2000 made a higher high over Friday's action so it broke a modest descending short-term trend, but unless 170 is the lows, this chart is not that far from a major melt down. If 170 is a double bottom low, then there is a lot of room on the upside.
We'll just have to see how these two charts perform after the 15th straight Monday rally. Long term, the Russell is trying to bounce off a support line, but if that fails another move to the 2022 lows would seem likely. So 170+ or bust!
We get retail sales data this morning and after last week's weak Consumer Confidence report sent stocks lower on Friday, the retail sales may confirm or refute the strength of the consumer.
The S&P 500 (C-fund) tagged the 50-day EMA after another impressive Monday rally. Unfortunately we are left not knowing if this is going to trigger another pullback toward the bottom of the recent range between 4325 and 4375, or if it will finally break above the 50-day and fill the open gap from September by 4400. Officially this is still a downtrend off the late July highs. The question is if the 200-day EMA was the low.
DWCPF (S-fund, small caps) had a big turnaround day and that could mean another test of the plethora of resistance in the 1730 area. Like the S&P and other index charts, the trend is down until we see some overhead resistance get taken out.
The EFA (I-fund) was up but lagged the US stocks indices. The dollar was down, which should have helped, so why it didn't keep up, I'm not sure. We'll have to watch and see if this is a short-term anomaly, or a trend.
BND (bonds / F-fund) was down sharply after Friday's rally. As I mentioned above, higher yields may not mean what they meant when inflation was the headlines, but the chart does show an open gap that may need filled before bonds can head back up.
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
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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There were no new major headlines yesterday although the selling on Friday may have had something to do with investors concerned about a possible escalation of the Israel / Hamas war over the weekend, and there were no major developments, so they may have bought back in. Just speculation, of course. This isn't the place to discuss what's going on over there but we do have to keep up with the headlines as it pertains to the financial markets. That's not a pleasant thought, but it's the reality of it, and believe me the big financial institutions are watching it closely. The fact that oil was down yesterday may have been the sigh of relief that gave investors the green light to buy.
It was an interesting rally for the stocks market and it wasn't because yields were higher. It was despite the rally in yields, and the talk is that higher yields at this point, with Fed very possibly on hold on interest rate hikes, is because economic growth projections are getting much better lately.
The dollar was down and that helped the indices rally yesterday, and here it is again testing the lower end of a very long ascending trading channel.
Keep an eye on HYG or JNK because these High Yield Corporate Bond Funds were down slightly yesterday so they did not participate in yesterday's rally, and that's a warnings sign. They could catch up today, but as of right now, it has me a little concerned. The stock market probably cannot sustain a rally if there's signs of trouble in the credit market.
With that short-term warning out of the way, the longer term has some potential bright spots. Four charts, the S&P 500 (SPY), the Nasdaq 100 (QQQ), Microsoft, and Apple all have impressive cup and handle formations. These are bullish formations. The caveat is that the handles have not broken to the upside yet and we don't know how long they could get before they do so, if and when they do breakout. The upside target would be extremely higher than they are now -- if they play out as C&H formations tend to.
A couple of the market leaders are still struggling, but both the Dow Transportation Index and the Russell 2000 small caps index rallied sharply yesterday. The Transports ran up to the 50-day EMA and the top of what could be an ugly bear flag, although it did manage to close back above its 200-day EMA. I give these mixed reviews, leaning on the bearish side, just because of the longer negative trends.
The Russell 2000 made a higher high over Friday's action so it broke a modest descending short-term trend, but unless 170 is the lows, this chart is not that far from a major melt down. If 170 is a double bottom low, then there is a lot of room on the upside.
We'll just have to see how these two charts perform after the 15th straight Monday rally. Long term, the Russell is trying to bounce off a support line, but if that fails another move to the 2022 lows would seem likely. So 170+ or bust!
We get retail sales data this morning and after last week's weak Consumer Confidence report sent stocks lower on Friday, the retail sales may confirm or refute the strength of the consumer.
The S&P 500 (C-fund) tagged the 50-day EMA after another impressive Monday rally. Unfortunately we are left not knowing if this is going to trigger another pullback toward the bottom of the recent range between 4325 and 4375, or if it will finally break above the 50-day and fill the open gap from September by 4400. Officially this is still a downtrend off the late July highs. The question is if the 200-day EMA was the low.
DWCPF (S-fund, small caps) had a big turnaround day and that could mean another test of the plethora of resistance in the 1730 area. Like the S&P and other index charts, the trend is down until we see some overhead resistance get taken out.
The EFA (I-fund) was up but lagged the US stocks indices. The dollar was down, which should have helped, so why it didn't keep up, I'm not sure. We'll have to watch and see if this is a short-term anomaly, or a trend.
BND (bonds / F-fund) was down sharply after Friday's rally. As I mentioned above, higher yields may not mean what they meant when inflation was the headlines, but the chart does show an open gap that may need filled before bonds can head back up.
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
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.
