The stock market rally ran into a little trouble yesterday after those MSFT and GOOG earnings reports. A little profit taking in a bear market after a big 3-day rally is not too much of a surprise, but the question is if the action killed the rally, or just paused it. The Dow and the Russell 2000 managed to close positive and other broader indices actually showed some relative strength, but the Nasdaq and S&P 500 took on the brunt of the losses because of those earnings, despite another day of lower yields and a falling dollar.
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Technically it was very poor action yesterday on the charts as the indices closed near the lows of the day after a healthy intraday rally, so we have negative reversal formations to deal with today.
Internally things weren't that bad at all as more stocks were up than down - it was 2 to 1 in favor of advancers on the NYSE. Also RSP, the Equal Weighted S&P 500 ETF, was up on the day. So the same 500 stocks that are in the S&P 500 index were up if treated equally rather than weighing those large tech stocks more heavily. That doesn't do the C-fund any good, which tracks the S&P 500 itself, but it explains why we saw a lot of positives outside of the S&P 500 yesterday.
Whether that can trump the technical damage done remains to be seen, and we may not know the answer to that until Friday after the upcoming earnings reports from Apple and Amazon after the close today.
Meta (aka Facebook) reported earnings right after the bell yesterday and it was a mixed report with a beat on revenue, but a miss on earnings, and it initially traded sharply lower after hours. So that's three of the top 5 companies reporting this week and all three traded down after earnings, so that is hurting the bear market rally.
On a positive note, the S&P 500 and Nasdaq futures were actually up in after hours trading.
Outside of earnings, the bond market did its job by sending yields lower, and the dollar fell sharply again, and that is likely why we saw some decent internal data in the stock indices.
The 10-year Treasury Yield dropped again but it is still holding above 4%. You can see that support is coming up fast and it will be a good test.
The support on the dollar gave way as it fell below its 50-day EMA, something that has been holding firmly for the last year or so, with just an occasional short stint below the average, so this is a key focus. If it pops back above that average we could see the selling resume in stocks.
We saw some decent action in things like the VIX, which was down 4%, the high yield corporate bonds were up (credit market), as were small caps and the Transports.
The Dow Transportation Index filled an overhead open gap and what it does from there will be telling. It did close ABOVE the bear flag yesterday so that it a bullish development if it can hold.
Again Apple and Amazon after the bell today could be the most important news of the day, but it won't impact our accounts until Friday, so if you are concerned or excited about about that, today is the day to make a move. It could make or break the bear market rally, although next week's FOMC meeting and rate hike will certainly play a big role.
The S&P 500 (C-fund) rallied early, hit the top of the bear flag and the resistance line which was the neckline of that head and shoulders pattern, and reversed down. This is awful technical short-term action although the one positive I see is that it closed above the 50-day EMA again. It will have to price in Meta's earnings miss today, but the futures are not showing any damage yet, and more important will be Apple and Amazon tonight. There's a lot at stake with those reports.
The DWCPF (small caps / S-fund) closed flat but it gave up a near 2% intraday gain, and that's not good look on a chart - those negative kangaroo tail reversals. That bear flag looks to be filling out the top of the flag and the two open gaps overhead may have to wait before getting filled, unless Apple and Amazon can change that tomorrow.
BND (bonds / F-fund) was up again as that support area (from a longer term chart back to 2016) near 69 - 70 has triggered at least a temporary bounce. It is possible that bonds are in play for a short to maybe even longer term trade if the right shoulder. of what looks like a head and shoulders pattern, continues to form.
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
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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Technically it was very poor action yesterday on the charts as the indices closed near the lows of the day after a healthy intraday rally, so we have negative reversal formations to deal with today.
Internally things weren't that bad at all as more stocks were up than down - it was 2 to 1 in favor of advancers on the NYSE. Also RSP, the Equal Weighted S&P 500 ETF, was up on the day. So the same 500 stocks that are in the S&P 500 index were up if treated equally rather than weighing those large tech stocks more heavily. That doesn't do the C-fund any good, which tracks the S&P 500 itself, but it explains why we saw a lot of positives outside of the S&P 500 yesterday.
Whether that can trump the technical damage done remains to be seen, and we may not know the answer to that until Friday after the upcoming earnings reports from Apple and Amazon after the close today.
Meta (aka Facebook) reported earnings right after the bell yesterday and it was a mixed report with a beat on revenue, but a miss on earnings, and it initially traded sharply lower after hours. So that's three of the top 5 companies reporting this week and all three traded down after earnings, so that is hurting the bear market rally.
On a positive note, the S&P 500 and Nasdaq futures were actually up in after hours trading.
Outside of earnings, the bond market did its job by sending yields lower, and the dollar fell sharply again, and that is likely why we saw some decent internal data in the stock indices.
The 10-year Treasury Yield dropped again but it is still holding above 4%. You can see that support is coming up fast and it will be a good test.
The support on the dollar gave way as it fell below its 50-day EMA, something that has been holding firmly for the last year or so, with just an occasional short stint below the average, so this is a key focus. If it pops back above that average we could see the selling resume in stocks.
We saw some decent action in things like the VIX, which was down 4%, the high yield corporate bonds were up (credit market), as were small caps and the Transports.
The Dow Transportation Index filled an overhead open gap and what it does from there will be telling. It did close ABOVE the bear flag yesterday so that it a bullish development if it can hold.
Again Apple and Amazon after the bell today could be the most important news of the day, but it won't impact our accounts until Friday, so if you are concerned or excited about about that, today is the day to make a move. It could make or break the bear market rally, although next week's FOMC meeting and rate hike will certainly play a big role.
The S&P 500 (C-fund) rallied early, hit the top of the bear flag and the resistance line which was the neckline of that head and shoulders pattern, and reversed down. This is awful technical short-term action although the one positive I see is that it closed above the 50-day EMA again. It will have to price in Meta's earnings miss today, but the futures are not showing any damage yet, and more important will be Apple and Amazon tonight. There's a lot at stake with those reports.
The DWCPF (small caps / S-fund) closed flat but it gave up a near 2% intraday gain, and that's not good look on a chart - those negative kangaroo tail reversals. That bear flag looks to be filling out the top of the flag and the two open gaps overhead may have to wait before getting filled, unless Apple and Amazon can change that tomorrow.
BND (bonds / F-fund) was up again as that support area (from a longer term chart back to 2016) near 69 - 70 has triggered at least a temporary bounce. It is possible that bonds are in play for a short to maybe even longer term trade if the right shoulder. of what looks like a head and shoulders pattern, continues to form.
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
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.
