What a day for the stock market yesterday as we saw a monster morning rally, triggered by big gains in the Chinese stocks markets, fade and eventually turn into losses right after the Fed policy statement. But by the close there was another reversal to the upside and stocks were able to close at the highs of the day. A 519-point gain for Dow paled in comparison to the gains in the broader indices like the S&P, Nasdaq, and small caps. The I-fund also got the benefit of sharp decline in the dollar.
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The S&P 500 (C-fund) gapped up on Wednesday in front of the FOMC meeting, but sold off sharply right after the policy statement was released. This pullback was actually a welcomed move because it filled in the morning gap already. The 200-day EMA is not far overhead (blue average) and that's almost always a tough test in a bearish market, which this is.
The DWCPF (small caps / S-fund) exploded nearly 4% and it went from a test of the lows on Monday, to a test of the overhead resistance yesterday. 1915 - 1925 will be a major pivot point for this chart as it could flip right back over, or breakout from that area.
The EFA (I-fund) had a big day with the dollar falling 0.7%. It moved above one of its descending resistance lines and the 74 area may be another test to see if this bear market rally has more room to run.
BND (Bonds / F-fund) created a positive reversal day but remains in its descending trading channel. Once again it is very oversold and probably due for some relief, but so were stocks. If this can get above that channel it may be worth a try instead of the G-fund if you don't want to be in stocks.
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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The Fed didn't say anything too surprising. If anything they were more hawkish than many might have expected as they suggested another 6 rate hikes over the next six meetings in 2022. Initially the market sold off on this, but that turned out to be typical Fed day trading dramatics from as things turned around in afternoon trading and we had one of those explosive bear market rallies.
The question is whether we have put in a low, and that is certainly a possibility, but it may be too soon to expect that because there was a lot of damage done to the charts. The question is, how long can a bear market rally last, if that is in fact what this is?
The internal breadth was impressive with advancing issues and share volume far outpacing the declining. It's not the 9 to 1 ratio that can mark a bottom, but it's wasn't too far off. Actually the Nasdaq volume was 8 to 1 in favor of advancing. If we can see a follow up day like that in the next few days, that could signify some kind of low for the Nasdaq.
The 10-year Treasury yield popped higher initially but pulled back later creating a possible negative reversal. The fact that it closed up 1.3% may technically keep it from being qualified for that.
The dollar was slammed and that should give the I-fund a boost. It reversed down after the Fed and it also pushed silver and gold from early losses, to gains.
I've been keeping an eye on the Dow Transportation Index as a possible tell for the rest of the market, and we wondered if that inverted head and shoulders would break to the upside. Well, a 5.5% gain not only gave us our answer, but it also already surpassed the upside target of the H&S pattern.
I posted this chart on Monday as possible targets from the owners of SPY call options and where they needed it to go to keep these positions from expiring worthless on Friday. With SPY being 420.07 that day, it was going to take a big move to get these open interest positions in the money. SPY closed at 435.62 yesterday so the 430's are now in the money but it's only about half way to its higher targets. It only has two days to get there so it's probably a tough task, but it's off to a good start.
We still have high inflation, a war, and earnings estimates that may need adjusting based on the rate hikes, so I don't think we're completely out of the woods yet, despite how bullish things felt over that last two days.
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The question is whether we have put in a low, and that is certainly a possibility, but it may be too soon to expect that because there was a lot of damage done to the charts. The question is, how long can a bear market rally last, if that is in fact what this is?
The internal breadth was impressive with advancing issues and share volume far outpacing the declining. It's not the 9 to 1 ratio that can mark a bottom, but it's wasn't too far off. Actually the Nasdaq volume was 8 to 1 in favor of advancing. If we can see a follow up day like that in the next few days, that could signify some kind of low for the Nasdaq.
The 10-year Treasury yield popped higher initially but pulled back later creating a possible negative reversal. The fact that it closed up 1.3% may technically keep it from being qualified for that.
The dollar was slammed and that should give the I-fund a boost. It reversed down after the Fed and it also pushed silver and gold from early losses, to gains.
I've been keeping an eye on the Dow Transportation Index as a possible tell for the rest of the market, and we wondered if that inverted head and shoulders would break to the upside. Well, a 5.5% gain not only gave us our answer, but it also already surpassed the upside target of the H&S pattern.
I posted this chart on Monday as possible targets from the owners of SPY call options and where they needed it to go to keep these positions from expiring worthless on Friday. With SPY being 420.07 that day, it was going to take a big move to get these open interest positions in the money. SPY closed at 435.62 yesterday so the 430's are now in the money but it's only about half way to its higher targets. It only has two days to get there so it's probably a tough task, but it's off to a good start.
We still have high inflation, a war, and earnings estimates that may need adjusting based on the rate hikes, so I don't think we're completely out of the woods yet, despite how bullish things felt over that last two days.
Admin Note: March Madness is starting! Free Contest with Prizes for winners - Deadline is the start of the first game on Thursday!
More info: https://www.tsptalk.com/mb/site-news-and-announcements/38581-march-madness-contest-2022-a.html
The S&P 500 (C-fund) gapped up on Wednesday in front of the FOMC meeting, but sold off sharply right after the policy statement was released. This pullback was actually a welcomed move because it filled in the morning gap already. The 200-day EMA is not far overhead (blue average) and that's almost always a tough test in a bearish market, which this is.
The DWCPF (small caps / S-fund) exploded nearly 4% and it went from a test of the lows on Monday, to a test of the overhead resistance yesterday. 1915 - 1925 will be a major pivot point for this chart as it could flip right back over, or breakout from that area.
The EFA (I-fund) had a big day with the dollar falling 0.7%. It moved above one of its descending resistance lines and the 74 area may be another test to see if this bear market rally has more room to run.
BND (Bonds / F-fund) created a positive reversal day but remains in its descending trading channel. Once again it is very oversold and probably due for some relief, but so were stocks. If this can get above that channel it may be worth a try instead of the G-fund if you don't want to be in stocks.
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Thanks for reading. We'll see you back here tomorrow.
Tom Crowley
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 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.
