As the first quarter came to an end on Thursday, any rebalancing from stocks into bonds had been completed, and that likely triggered some pent up buying energy that had to wait until April to take place from some money managers. After a fairly flat start to the week, we saw impressive gains across the board buoyed by new inflows for the 1st of the month, the start of a new quarter, and those rebalancing restrictions getting lifted - not to mention it was the day before a long holiday weekend, which tend to be bullish. The Dow gained 172-points, but it was actually the laggard on Thursday.
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The dollar was down on Thursday, as were yields, and the credit market surged toward its prior highs. All generally good things for stocks, at least at this moment when rising yields seem to be the main cause for concerns.
The 10-year yield chart may be indicating that the dip on Thursday may be short-lived as there is support just at the low of the day. And guess what? As if on cue, the jobs report on Friday may just trigger that on Monday.
Although Friday was a market holiday, we did get the jobs report, and it was a doozy. 916,000 jobs were added in March, well above the 675K that were expected. The futures market was open early on Friday and the initial reaction was a pop in the stock indices on the strong economic news. below is a 15 minute chart of the S&P futures where every bar represents 15 minutes of trading. You can see the initial surge of buying right after the report was released, but there was some give backs in the 30 minutes afterward. This chart ends with Friday's morning session and the futures won't open again until Sunday evening, and I am writing before that.
The bad news potentially for the market is that the strong economic report will likely push yields up, at least it did initially as the bond futures saw the yield on the 10-year just back over 1.7%, up from 1.68%, and it may be on the way to fill that gap created at Friday's open.
If yields remain elevated, it could be particularly challenging for the rally in the Nasdaq and small caps as growth stocks tend to underperform when yields are racing higher.
The charts made some impressive moves on Friday - some making new highs and others breaking through resistance lines, but there are, of course, other potential problems, as there always seems to be. Stocks sure love to climb that wall of worry - until they don't, and that usually comes when complacency gets elevated, and there are some signs of that now with the VIX closing with a 17 handle on Thursday (17.3), for the first time since the pre-COVID days.
Look for a positive open on Monday - even a possible large gap up, but jobs report moves are emotional and not always something we can trust.
March Madness contest links: More Info. Yahoo! Tourney Pick'em.
The S&P 500 (C-fund) posted a new intraday and closing high on Thursday, and that was before we had the results of the strong jobs report. New highs has to be a bullish thing right? Yes of course, but all we care about is what happens next, and looking at the pattern of this bullish market over the last several months, it actually looks like the trend is telling us that any further upside may be met with some eventual selling. There is a pretty clear pattern of breakouts, followed by some chopping at the new highs for a few days, but then a pullback below that breakout point again. We'll see.
The weekly chart of the S&P 500 shows just how far above the the 200-week EMA (weekly average) the S&P is, compared to prior market peaks. This isn't a good timing mechanism since both the S&P and the moving average are moving upward together, but at some point they become too stretched and a correct occurs.
The DWCPF (small caps / S-fund) rallied big on Thursday and pushed back above that 20-day EMA. It looks like it could make a move toward the the top of that large descending channel that has been created over the last couple of months. The higher low looks like a good sign, but it must move over 2225 (the prior peak) to confirm a new uptrend. Any failure below those resistance areas would be a bad sign technically.
The Nasdaq has been lagging the S&P badly, but it blasted though that descending blue dashed resistance line on Thursday. However, it left an open gap below, and the larger formation looks like a possible bear flag. Getting over 13,600 would be a sigh of relief for the bulls.
The EFA (I-Fund) broke out of its small bull flag, just as you'd hope a bull flag would react. It looks ready to challenge the prior highs which would make a triple top, and they is usually easier to break above than a double top - although not always.
The High Yield Corporate Bond Fund has been the most impressive mover over the last two weeks, and that may be telling us that there is nothing wrong with the credit market, and that is good news for the bulls. It could find some trouble at the prior peak and we'll if the double top is a deal breaker for the rally, or just another obstacle to overcome.
BND (bonds / F-fund) rallied on Friday when the yields were falling, but the strong jobs report could reverse that today as we suspect yields will rally on that data. Bond prices move counter to bond yields.
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 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 dollar was down on Thursday, as were yields, and the credit market surged toward its prior highs. All generally good things for stocks, at least at this moment when rising yields seem to be the main cause for concerns.
The 10-year yield chart may be indicating that the dip on Thursday may be short-lived as there is support just at the low of the day. And guess what? As if on cue, the jobs report on Friday may just trigger that on Monday.
Although Friday was a market holiday, we did get the jobs report, and it was a doozy. 916,000 jobs were added in March, well above the 675K that were expected. The futures market was open early on Friday and the initial reaction was a pop in the stock indices on the strong economic news. below is a 15 minute chart of the S&P futures where every bar represents 15 minutes of trading. You can see the initial surge of buying right after the report was released, but there was some give backs in the 30 minutes afterward. This chart ends with Friday's morning session and the futures won't open again until Sunday evening, and I am writing before that.
The bad news potentially for the market is that the strong economic report will likely push yields up, at least it did initially as the bond futures saw the yield on the 10-year just back over 1.7%, up from 1.68%, and it may be on the way to fill that gap created at Friday's open.
If yields remain elevated, it could be particularly challenging for the rally in the Nasdaq and small caps as growth stocks tend to underperform when yields are racing higher.
The charts made some impressive moves on Friday - some making new highs and others breaking through resistance lines, but there are, of course, other potential problems, as there always seems to be. Stocks sure love to climb that wall of worry - until they don't, and that usually comes when complacency gets elevated, and there are some signs of that now with the VIX closing with a 17 handle on Thursday (17.3), for the first time since the pre-COVID days.
Look for a positive open on Monday - even a possible large gap up, but jobs report moves are emotional and not always something we can trust.
March Madness contest links: More Info. Yahoo! Tourney Pick'em.
The S&P 500 (C-fund) posted a new intraday and closing high on Thursday, and that was before we had the results of the strong jobs report. New highs has to be a bullish thing right? Yes of course, but all we care about is what happens next, and looking at the pattern of this bullish market over the last several months, it actually looks like the trend is telling us that any further upside may be met with some eventual selling. There is a pretty clear pattern of breakouts, followed by some chopping at the new highs for a few days, but then a pullback below that breakout point again. We'll see.
The weekly chart of the S&P 500 shows just how far above the the 200-week EMA (weekly average) the S&P is, compared to prior market peaks. This isn't a good timing mechanism since both the S&P and the moving average are moving upward together, but at some point they become too stretched and a correct occurs.
The DWCPF (small caps / S-fund) rallied big on Thursday and pushed back above that 20-day EMA. It looks like it could make a move toward the the top of that large descending channel that has been created over the last couple of months. The higher low looks like a good sign, but it must move over 2225 (the prior peak) to confirm a new uptrend. Any failure below those resistance areas would be a bad sign technically.
The Nasdaq has been lagging the S&P badly, but it blasted though that descending blue dashed resistance line on Thursday. However, it left an open gap below, and the larger formation looks like a possible bear flag. Getting over 13,600 would be a sigh of relief for the bulls.
The EFA (I-Fund) broke out of its small bull flag, just as you'd hope a bull flag would react. It looks ready to challenge the prior highs which would make a triple top, and they is usually easier to break above than a double top - although not always.
The High Yield Corporate Bond Fund has been the most impressive mover over the last two weeks, and that may be telling us that there is nothing wrong with the credit market, and that is good news for the bulls. It could find some trouble at the prior peak and we'll if the double top is a deal breaker for the rally, or just another obstacle to overcome.
BND (bonds / F-fund) rallied on Friday when the yields were falling, but the strong jobs report could reverse that today as we suspect yields will rally on that data. Bond prices move counter to bond yields.
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 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.
