Stocks followed through on Friday's big rally, tacking more gains yesterday. The Dow gained 216-points, and one change from a week or two ago is that the gains are being seen across all of the major indices, as opposed to seeing some up and some down, which had been the case. The dollar was down very sharply and that may have been the catalysts as prices tend to go up when the dollar is down. Bonds ticked slightly higher, and commodities rallied big.
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The Pfizer vaccine being approved may have been part of the catalyst for stocks yesterday, but Friday's rally before that news also suggested that we could see some follow through on a Monday - at least at the open. But the emotional Monday morning gap up, which has a tendency to fail, did not fail and other than some slipping near the close, the indices closed just off their highs of the day.
The next 1 to 3 days could be interesting because this would actually be when you'd see any double dip attempts to potentially test the prior low. I showed that chart in the DWCPF S-fund chart yesterday.
Internally the rally was very strong, and if there's anything to complain about, it would be the continuing high number of new lows while the indices were making new highs. Again, that can trigger Hindenburg Omen warnings, and they can get investors nervous.
The dollar tanked 0.60%, which is a big move for the greenback. There is a ton of support just above 24.80, so that may be where it is heading, but it may be tough to fall through.
The year to date chart of the dollar shows the double top, and this subsequent pullback, but this may be short-lived.
Stocks rallied hard with the help of a falling dollar, but as we know commodities and the I-fund are even more impacted. Lumber gains 5.3% yesterday. Oil jumped 5.6%, gold added 1.3%, and of course the EFA (the index our I-fund tracks) was up almost 1%. Copper looks like it may be trying to find a bottom after it reversed off the 200-day EMA and gains 2.4% yesterday. The dollar certainly helped, but it is also a potential sign that the slow down in the economy is showing signs of reversing back up.
The Jackson Hole Economic Symposium starts Thursday and the market could pause and hang on every word from the Fed. Since the Fed does seem to tread lightly when stocks are in a rough patch, so this recent rally could give them a green light to dose out some tough news, such as their plan on tapering, although this isn't an FOMC meeting and any comments would not be official. It has been 210 days since we've seen a 5% decline in the S&P 500, and that's a long time. With inflation still a concern, the Fed may see the relentless rally as part of the problem.
The S&P 500 (C-fund) made another new intraday high, putting last week's pullback in the rear-view mirror rather quickly, which has been par for the course. These type of straight up rebounds have been the precursor to "F" flag type formations, as we saw several times in recent months. I expected a 2nd dip early this week but the S&P 500 has not participated in those like we've seen on the S-fund.
The DWCPF (S-fund) poked its head back above the 50-day EMA, which surprised me a bit since often the first attempt back above is a little tough to do. It's actually still slightly below its 50 day simple average (last 50 day closes divided by 50) so I wouldn't be surprised if this pulls back in the next day or so like we saw in March and May after those attempts failed on the first attempt. There's also an open gap down below 2200 that would be a convenient retest area.
The EFA (EAFE Index / I-fund) gapped up and with the dollar tanking we should see a decent price for the I-fund (Monday's prices not updated as of this writing) after Friday's short change. One gap was filled (blue) but another was open (red). It is back above the 50-day EMA and that looks like some kind of a inverted head and shoulders pattern, which tend to be bullish, but seasonality may start getting tough again at the end of the month so it may need to make its move soon.
Once again I bring our attention to the Japanese Nikkei Index which is the largest holding in the I-fund. Not the best looking chart here as it fell below its 200-day EMA last week, and yesterday's rally stalled at the average again. The next move may be crucial, but even if it does rally, that 50-day average has been pretty stubborn lately.
The Dow Transportation Index rallied almost 1% and it got back above its 100-day average. The bad news is, it couldn't hold above the 50-day EMA into the close, and it is below the longer-term resistance line so there is still work to be done here.
The BND (bonds / F-fund) was up slightly as it was a fairly quiet day in the bond market. That old resistance line of the trading channel continues to hold as support.
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 Pfizer vaccine being approved may have been part of the catalyst for stocks yesterday, but Friday's rally before that news also suggested that we could see some follow through on a Monday - at least at the open. But the emotional Monday morning gap up, which has a tendency to fail, did not fail and other than some slipping near the close, the indices closed just off their highs of the day.
The next 1 to 3 days could be interesting because this would actually be when you'd see any double dip attempts to potentially test the prior low. I showed that chart in the DWCPF S-fund chart yesterday.
Internally the rally was very strong, and if there's anything to complain about, it would be the continuing high number of new lows while the indices were making new highs. Again, that can trigger Hindenburg Omen warnings, and they can get investors nervous.
The dollar tanked 0.60%, which is a big move for the greenback. There is a ton of support just above 24.80, so that may be where it is heading, but it may be tough to fall through.
The year to date chart of the dollar shows the double top, and this subsequent pullback, but this may be short-lived.
Stocks rallied hard with the help of a falling dollar, but as we know commodities and the I-fund are even more impacted. Lumber gains 5.3% yesterday. Oil jumped 5.6%, gold added 1.3%, and of course the EFA (the index our I-fund tracks) was up almost 1%. Copper looks like it may be trying to find a bottom after it reversed off the 200-day EMA and gains 2.4% yesterday. The dollar certainly helped, but it is also a potential sign that the slow down in the economy is showing signs of reversing back up.
The Jackson Hole Economic Symposium starts Thursday and the market could pause and hang on every word from the Fed. Since the Fed does seem to tread lightly when stocks are in a rough patch, so this recent rally could give them a green light to dose out some tough news, such as their plan on tapering, although this isn't an FOMC meeting and any comments would not be official. It has been 210 days since we've seen a 5% decline in the S&P 500, and that's a long time. With inflation still a concern, the Fed may see the relentless rally as part of the problem.
The S&P 500 (C-fund) made another new intraday high, putting last week's pullback in the rear-view mirror rather quickly, which has been par for the course. These type of straight up rebounds have been the precursor to "F" flag type formations, as we saw several times in recent months. I expected a 2nd dip early this week but the S&P 500 has not participated in those like we've seen on the S-fund.
The DWCPF (S-fund) poked its head back above the 50-day EMA, which surprised me a bit since often the first attempt back above is a little tough to do. It's actually still slightly below its 50 day simple average (last 50 day closes divided by 50) so I wouldn't be surprised if this pulls back in the next day or so like we saw in March and May after those attempts failed on the first attempt. There's also an open gap down below 2200 that would be a convenient retest area.
The EFA (EAFE Index / I-fund) gapped up and with the dollar tanking we should see a decent price for the I-fund (Monday's prices not updated as of this writing) after Friday's short change. One gap was filled (blue) but another was open (red). It is back above the 50-day EMA and that looks like some kind of a inverted head and shoulders pattern, which tend to be bullish, but seasonality may start getting tough again at the end of the month so it may need to make its move soon.
Once again I bring our attention to the Japanese Nikkei Index which is the largest holding in the I-fund. Not the best looking chart here as it fell below its 200-day EMA last week, and yesterday's rally stalled at the average again. The next move may be crucial, but even if it does rally, that 50-day average has been pretty stubborn lately.
The Dow Transportation Index rallied almost 1% and it got back above its 100-day average. The bad news is, it couldn't hold above the 50-day EMA into the close, and it is below the longer-term resistance line so there is still work to be done here.
The BND (bonds / F-fund) was up slightly as it was a fairly quiet day in the bond market. That old resistance line of the trading channel continues to hold as support.
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.
