Bitcoin was the name of the game yesterday. The crypto-currency dropped 30% in one day, which took it down 54% from its all time highs made just last month, and that sent a shock wave throughout the market. As bitcoin recovered from its low near $30K yesterday to close just below $40K, stocks stabilized and the early sell off saw some buyers step up by the close. The Dow lost 165-point, well off the nearly 600-point loss it had in the morning. Bonds were down, the dollar was up big, and for those watching, Lumber had its first positive day after 7 consecutive days of severe selling.
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The Fed also discussed tapering plans for their bond buying program, and that also got the stock market concerned.
The internals didn't matter quite as much yesterday with the reversal. The selling was obviously heavy early on, but the buying intensified as we approached the close. New highs / new lows were about even on the NYSE and Nasdaq.
We've been seeing a lot of rotational plays between sectors and indices lately, and perhaps looking at where the indices came from may help tell which may be overdone and which may be worth a play. I marked the pre-COVID highs and the recent 2021 highs and you can see that we've had very good gains despite the crash in between the two.
The Nasdaq and small caps have done very well while the S&P 500 has done good, but almost half as well as those other two. Recently the S&P (C-fund) has been outperforming so perhaps that is where we should be looking when in the stock funds?
The weakness in the dollar also suggests that the I-fund is in play, if you don't mind the dollar's impact and the odd timing of the pricing because of the overnight markets in the international markets.
My instinct is to be a buyer when we get a reversal like yesterday, but often that is premature. Yesterday was a bit of a washout but we still have some technical issues in the small caps chart, and also it isn't uncommon for sell offs to retest the lows after an initial dead cat bounce. I'm not saying that is what is going to happen, but rather don't be surprised if it does. That hasn't been the case so much at recent lows, but historically a successful test of a low makes for a good bottom. If we rollover again and the low gets taken out, then we know that the pullback is not done yet - obviously.
The S&P 500 (C-fund) was down modestly yesterday but it survived an early beating and rebounded to close back above the 50-day EMA, after breaking below it during the sell off. One of the rising channels has broken (blue) and it held as resistance last week, and we do have a bear flag potentially forming, but as long as the 50-day EMA holds, the bulls will likely be around to buy the dips.
The DWCPF (S-fund) failed at the 50-day EMA and that's the concern here. There was a positive reversal and an open gap overhead, but that resistance near 2130 - 2145 still looms large.
The Russell 2000 has been lagging lately and the mothman formation is still around. There's some rising support near 212 and descending resistance near 219. That's what it is dealing with as they converge.
The EFA was down sharply and the dollar was up sharply so the I-fund took a hit. It remains above key support so we'll give the bulls the nod here, but 77 - 78 needs to hold.
BND (F-fund) rallied early but reversed down as stocks reverse up. Bonds look bad here below support and with another bear flag forming.
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 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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The Fed also discussed tapering plans for their bond buying program, and that also got the stock market concerned.
The internals didn't matter quite as much yesterday with the reversal. The selling was obviously heavy early on, but the buying intensified as we approached the close. New highs / new lows were about even on the NYSE and Nasdaq.
We've been seeing a lot of rotational plays between sectors and indices lately, and perhaps looking at where the indices came from may help tell which may be overdone and which may be worth a play. I marked the pre-COVID highs and the recent 2021 highs and you can see that we've had very good gains despite the crash in between the two.
The Nasdaq and small caps have done very well while the S&P 500 has done good, but almost half as well as those other two. Recently the S&P (C-fund) has been outperforming so perhaps that is where we should be looking when in the stock funds?
The weakness in the dollar also suggests that the I-fund is in play, if you don't mind the dollar's impact and the odd timing of the pricing because of the overnight markets in the international markets.
My instinct is to be a buyer when we get a reversal like yesterday, but often that is premature. Yesterday was a bit of a washout but we still have some technical issues in the small caps chart, and also it isn't uncommon for sell offs to retest the lows after an initial dead cat bounce. I'm not saying that is what is going to happen, but rather don't be surprised if it does. That hasn't been the case so much at recent lows, but historically a successful test of a low makes for a good bottom. If we rollover again and the low gets taken out, then we know that the pullback is not done yet - obviously.
The S&P 500 (C-fund) was down modestly yesterday but it survived an early beating and rebounded to close back above the 50-day EMA, after breaking below it during the sell off. One of the rising channels has broken (blue) and it held as resistance last week, and we do have a bear flag potentially forming, but as long as the 50-day EMA holds, the bulls will likely be around to buy the dips.
The DWCPF (S-fund) failed at the 50-day EMA and that's the concern here. There was a positive reversal and an open gap overhead, but that resistance near 2130 - 2145 still looms large.
The Russell 2000 has been lagging lately and the mothman formation is still around. There's some rising support near 212 and descending resistance near 219. That's what it is dealing with as they converge.
The EFA was down sharply and the dollar was up sharply so the I-fund took a hit. It remains above key support so we'll give the bulls the nod here, but 77 - 78 needs to hold.
BND (F-fund) rallied early but reversed down as stocks reverse up. Bonds look bad here below support and with another bear flag forming.
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 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.
