Stocks began the new week with another rally after just a one-day pullback, so the dip buyers are still lurking very closely and jumping on any weakness. The Dow gained 76-points but it was the Nasdaq and small caps that led the way with solid gains near 1%. Bonds were up with yields slipping lower. We'll start seeing some earnings from potential market movers this week as Q2 earnings season kicks off.
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It wasn't overwhelming as the NYSE saw about 8 advancers for every 6 decliners, and trading volume was surprisingly close to even at 9 to 8 in favor of advancing volume. But the Nasdaq saw much better ratios hence the near 1% gain in the tech heavy index.
We see an interesting battle going on the 10-year Treasury Yield chart with a test of the 50-day EMA holding for three straight days near 3.75%. However there is some resistance not far above near 3.85%.
The dollar was down slightly and very oversold in the short-term as it retests an old open gap from back in February, and a stubborn little support area just below 27.60. The open gaps represent possible snap back rally targets. Whether the stock market pulls back in the short-term may depend on if those gaps get tested or not. A rally in the dollar would likely put pressure on stock prices.
Remember when the beleaguered Regional Banks were holding the S-fund down back when we saw some failures earlier this year? That relationship changed when the S-fund (DWCPF) broke above the April / may resistance. Now KRE is back testing that resistance and that's a bullish looking inverted head and shoulders pattern on the chart.
The relationship has changed as I said but a breakout above 45 for KRE could keep the S-fund buoyant. A failure at 45 on KRE could initiate a pullback in the small caps fund.
The next chart is the Equity Put / Call Ratio which, at extremes, can be a good indication of when stocks have gone in one direction or the other for too long. The current 0.51 ratio means there are twice as many call options being bought than puts. Calls being "bets" that stocks will go up, and puts are bets on the downside.
During the COVID crash and the inflation driven bear market of last year, we saw a ratio of about 1 to 1 or higher where just as many puts, or more, were being bought than call options. That's usually a sign that there's too much fear out there and stocks would be getting ready to stop falling.
The current 0.51 is getting on the greedy side although we did see a lot of greed that did not take the market down after COVID because of the cheap, easy money that was being floated about. Now with interest rates at 5.0% instead of 0%, this 0.51 ratio seems low, and that could mean a greedy peak may be getting closer. How close? That's what everyone wants to know, but they don't make it easy on us.
Banks, Netflix, and Tesla will be some of the highlighted stocks to kick off the 2nd quarter earnings reports this week. This is crucial because expectations are very low. Does this set up a possible upside surprise, or has the market already priced in better than expected earnings with the big rally in the first half of the year?
The S&P 500 (C-fund) posted another nice gain on Monday as it hovers above that old blue resistance line which may now act as support. There's two rising channels noted on the chart and it's hard to argue that either of these trends are in trouble. It just happens to be quite overbought in the short-term, and considering the seasonal period and earnings season starting, there is a catalysts for a pause, but momentum is rarely easy to stop.
EFA (I-fund) was down slightly but closed off the lows of the day, not taking advantage of the opportunity to clean up the chart by filling that open gap, so that remains a possibility. And, there's an even larger open gap down below 72 so there is some reason to be concerned here in the short term. The one thing that could save it is if the dollar does not bounce back from its big decline this month.
BND (F-fund) was up modestly and it did fill in one of its open gap when trading lower on Monday morning. The 50-day EMA is also still holding, but like the I-fund, there is another big open gap below that could garner attention.
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.
Thanks so much 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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It wasn't overwhelming as the NYSE saw about 8 advancers for every 6 decliners, and trading volume was surprisingly close to even at 9 to 8 in favor of advancing volume. But the Nasdaq saw much better ratios hence the near 1% gain in the tech heavy index.
We see an interesting battle going on the 10-year Treasury Yield chart with a test of the 50-day EMA holding for three straight days near 3.75%. However there is some resistance not far above near 3.85%.
The dollar was down slightly and very oversold in the short-term as it retests an old open gap from back in February, and a stubborn little support area just below 27.60. The open gaps represent possible snap back rally targets. Whether the stock market pulls back in the short-term may depend on if those gaps get tested or not. A rally in the dollar would likely put pressure on stock prices.
Remember when the beleaguered Regional Banks were holding the S-fund down back when we saw some failures earlier this year? That relationship changed when the S-fund (DWCPF) broke above the April / may resistance. Now KRE is back testing that resistance and that's a bullish looking inverted head and shoulders pattern on the chart.
The relationship has changed as I said but a breakout above 45 for KRE could keep the S-fund buoyant. A failure at 45 on KRE could initiate a pullback in the small caps fund.
The next chart is the Equity Put / Call Ratio which, at extremes, can be a good indication of when stocks have gone in one direction or the other for too long. The current 0.51 ratio means there are twice as many call options being bought than puts. Calls being "bets" that stocks will go up, and puts are bets on the downside.
During the COVID crash and the inflation driven bear market of last year, we saw a ratio of about 1 to 1 or higher where just as many puts, or more, were being bought than call options. That's usually a sign that there's too much fear out there and stocks would be getting ready to stop falling.
The current 0.51 is getting on the greedy side although we did see a lot of greed that did not take the market down after COVID because of the cheap, easy money that was being floated about. Now with interest rates at 5.0% instead of 0%, this 0.51 ratio seems low, and that could mean a greedy peak may be getting closer. How close? That's what everyone wants to know, but they don't make it easy on us.
Banks, Netflix, and Tesla will be some of the highlighted stocks to kick off the 2nd quarter earnings reports this week. This is crucial because expectations are very low. Does this set up a possible upside surprise, or has the market already priced in better than expected earnings with the big rally in the first half of the year?
The S&P 500 (C-fund) posted another nice gain on Monday as it hovers above that old blue resistance line which may now act as support. There's two rising channels noted on the chart and it's hard to argue that either of these trends are in trouble. It just happens to be quite overbought in the short-term, and considering the seasonal period and earnings season starting, there is a catalysts for a pause, but momentum is rarely easy to stop.
EFA (I-fund) was down slightly but closed off the lows of the day, not taking advantage of the opportunity to clean up the chart by filling that open gap, so that remains a possibility. And, there's an even larger open gap down below 72 so there is some reason to be concerned here in the short term. The one thing that could save it is if the dollar does not bounce back from its big decline this month.
BND (F-fund) was up modestly and it did fill in one of its open gap when trading lower on Monday morning. The 50-day EMA is also still holding, but like the I-fund, there is another big open gap below that could garner attention.
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.
Thanks so much 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.
