Stocks were flat for most of the day on Friday, but surged late to close at the highs of the day and with solid gains. The Dow lagged gaining just 28-points but the broader indices tacked on about 0.5% after the late rally. Bonds were clobbered as that chart broke down, and the dollar was up leaving the I-fund a little behind the U.S. indices, but it still made a new high.
[TABLE="align: center"]
[TR]
[TD="align: center"] Daily TSP Funds Return
[TABLE="align: center"]
[TR]
[TD="align: right"][/TD]
[/TR]
[/TABLE]
[/TD]
[TD]
[/TD]
[TD="width: 362, align: center"]
[/TD]
[/TR]
[/TABLE]
As we have discussed before, the market has green lights all over with stimulus, the Fed, a strong credit market, etc., but the question is whether investors are already positioned for this? Is the relentless positive market action creating that euphoric sentiment, the sentiment that typically comes right before the market runs out of bullets and takes a serious, but mostly needed, correction?
We talked about the rising price of oil, and Friday was another big day as oil rallied another 4.6% to 59.47 - very close to that $60 plus area that can pose a problem since it will take gasoline prices up with it.
Gasoline rallied about 10% on Friday, and is the COVID economy ready for pre-COVID gas prices?
We'll talk about other possible inflationary signs down below with the price of copper and lumber.
The futures were up when they traded Monday evening, and Europe was up big on Monday, so that may be pointing to a positive open on Tuesday. Does that mean we won't get a holiday reversal? I don't know if this is a good illustration because pre-holiday reversals tend to go against the prevailing larger trend, and heading into the latter half of last week, stock were rallying, so we really didn't get a pre-holiday reversal since stocks rallied right into the weekend.
After rallying in early December, the S&P 500 pulled back for a few days before Christmas, so that was a pre-holiday reversal, and the prevailing upside trend resumed right after Christmas on the 28th. The same with MLK Day where stocks dipped for a couple of days before the holiday weekend, but the upside trend resumed after the weekend - although not for long.
This last week stocks rallied into the holiday weekend, but the prevailing trend was also up, so I'm not sure about getting a post holiday reversal, in the sense of how these tend to work. The futures were up, as I said, so either we get one of those emotional Monday (in this case Tuesday) gap openings that gets filled quickly, or we won't have a holiday reversal this time.
The S&P 500 (C-fund) keeps chugging along and continues to hug the overhead rising resistance line. We've seen this before, but eventually we see some kind of dip back to the moving averages or the bottom of the channel. The market will make it painful for anyone trying to be patient and waiting for a dip to buy, especially if you missed the January 5% dip.
The weekly chart of the S&P 500 continues to climb and defy gravity. These bullish runs can last longer than anyone ever expects, but when rallies end, they can be abrupt. I have no time frame in mind, but I expect the top of that blue channel to get tested eventually. Could be months. Could be years, but it's likely to happen.
The DWCPF (small caps / S-fund) closed at another new high as it rides along its rising resistance line. There's also a possible "flat top" forming and we saw one in January just before a dip, but if the futures hold into Tuesday's open, that could be history in a hurry. If we do get a positive open, watch for a possible failed breakout, which happened on Monday January 25, right after that flat top.
The EFA (I-fund) followed through on Thursday's breakout with another nice rally on Friday, and continues to climb in that narrow rising trading channel.
The falling dollar is obviously helping the I-fund but as we talked about above, it's also pushing up the price of oil which can also push up the prices of anything that gets shipped / delivered, etc., which is almost everything. Also, the price of copper and lumber are seeing new highs and so we have to consider the possibility that inflation could be an upcoming concern. Copper has nearly doubled and lumber has more than tripled since last March.
BND (bonds / F-fund) broke down from its bear flag on Friday, which is what a bear flag is supposed to do, and the one prior to that did the same thing so it's nice to see technical analysis working. This should be a bearish sign for bonds unless the January low can hold again.
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
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.
[TABLE="align: center"]
[TR]
[TD="align: center"] Daily TSP Funds Return
[TR]
[TD="align: right"][/TD]
[/TR]
[/TABLE]
[/TD]
[TD]
[/TD]
[TD="width: 362, align: center"]
[/TR]
[/TABLE]
As we have discussed before, the market has green lights all over with stimulus, the Fed, a strong credit market, etc., but the question is whether investors are already positioned for this? Is the relentless positive market action creating that euphoric sentiment, the sentiment that typically comes right before the market runs out of bullets and takes a serious, but mostly needed, correction?
We talked about the rising price of oil, and Friday was another big day as oil rallied another 4.6% to 59.47 - very close to that $60 plus area that can pose a problem since it will take gasoline prices up with it.
Gasoline rallied about 10% on Friday, and is the COVID economy ready for pre-COVID gas prices?
We'll talk about other possible inflationary signs down below with the price of copper and lumber.
The futures were up when they traded Monday evening, and Europe was up big on Monday, so that may be pointing to a positive open on Tuesday. Does that mean we won't get a holiday reversal? I don't know if this is a good illustration because pre-holiday reversals tend to go against the prevailing larger trend, and heading into the latter half of last week, stock were rallying, so we really didn't get a pre-holiday reversal since stocks rallied right into the weekend.
After rallying in early December, the S&P 500 pulled back for a few days before Christmas, so that was a pre-holiday reversal, and the prevailing upside trend resumed right after Christmas on the 28th. The same with MLK Day where stocks dipped for a couple of days before the holiday weekend, but the upside trend resumed after the weekend - although not for long.
This last week stocks rallied into the holiday weekend, but the prevailing trend was also up, so I'm not sure about getting a post holiday reversal, in the sense of how these tend to work. The futures were up, as I said, so either we get one of those emotional Monday (in this case Tuesday) gap openings that gets filled quickly, or we won't have a holiday reversal this time.
The S&P 500 (C-fund) keeps chugging along and continues to hug the overhead rising resistance line. We've seen this before, but eventually we see some kind of dip back to the moving averages or the bottom of the channel. The market will make it painful for anyone trying to be patient and waiting for a dip to buy, especially if you missed the January 5% dip.
The weekly chart of the S&P 500 continues to climb and defy gravity. These bullish runs can last longer than anyone ever expects, but when rallies end, they can be abrupt. I have no time frame in mind, but I expect the top of that blue channel to get tested eventually. Could be months. Could be years, but it's likely to happen.
The DWCPF (small caps / S-fund) closed at another new high as it rides along its rising resistance line. There's also a possible "flat top" forming and we saw one in January just before a dip, but if the futures hold into Tuesday's open, that could be history in a hurry. If we do get a positive open, watch for a possible failed breakout, which happened on Monday January 25, right after that flat top.
The EFA (I-fund) followed through on Thursday's breakout with another nice rally on Friday, and continues to climb in that narrow rising trading channel.
The falling dollar is obviously helping the I-fund but as we talked about above, it's also pushing up the price of oil which can also push up the prices of anything that gets shipped / delivered, etc., which is almost everything. Also, the price of copper and lumber are seeing new highs and so we have to consider the possibility that inflation could be an upcoming concern. Copper has nearly doubled and lumber has more than tripled since last March.
BND (bonds / F-fund) broke down from its bear flag on Friday, which is what a bear flag is supposed to do, and the one prior to that did the same thing so it's nice to see technical analysis working. This should be a bearish sign for bonds unless the January low can hold again.
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
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.
