Stocks rallied out of the gate on Thursday and while the Dow and S&P drifted slightly lower from that opening high for most of the day, a push higher into the close saw the indices end the day with modest gains. The Nasdaq held up better and had a strong day as those big tech stocks continued to bounce back. The Dow gained 35-points. Bonds were up.
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The advance / decline issues and volume were decisively positive, but typical for a modestly positive day.
We saw the initial jobless claims come in a little higher than estimated yesterday and that leads us into today's jobs report as we get the September numbers this morning (Friday) and estimates are looking for a gain of 800,000 jobs, and an unemployment rate of 8.2%.
That could be a market mover but FOMO (fear of missing out) seems to be helping keep the stock market buoyant as the stimulus package negotiations continue.
I know that I sometimes get a little too focused on seasonality, something that is almost always just a slight advantage or disadvantage for stocks, except for maybe around major holidays. But this election year chart has been too compelling for me to ignore. Obviously it is not going to be exact as we are dealing with average returns here, but look at the similarity over the last 3 months that we are seeing between the S&P 500 chart compared to the average election year chart.
I'm intrigued by the second low in the descending channel, which came in September, where the election year average chart saw that closer to mid-October. The open gap near 3305 is one key reasons why I believe we could see another dip before a full breakout, which on the election year chart comes closer to Halloween. But if we do get a stimulus package passed, perhaps we won't be waiting that long for a breakout.
As we talked about, politically it doesn't make a whole lot of sense to expect the democrats to make any kind of deal before the election that could benefit President Trump, unless they can get something in the bill that will give them a victory as well. The republicans are not only balking at the size of the stimulus package, but also the democrat's attempt in their bill to extend stimulus checks to illegal immigrants and give deportation protections in certain “essential” jobs. So it's going to be interesting to see how they resolve this - if they can.
I kind of believe that investors who think this deal is going to get made soon, may be overly optimistic. As far as how that impacts us market timers, it should keep volatility high and that usually means better trading opportunities. By the way, the VIX (volatility index) was actually up 1.25% yesterday, which was the 2nd day in a row it was up when stocks were up as well, which is on the unusual side.
Update 1:55 AM ET: You may have heard that President Trump and First Lady Melania have tested positive for COVID, and that could change the complexion of the day. We wish them well.
The S&P 500 (C-fund) was up a solid 0.53% on Thursday, but that was about half of the opening bell highs so we did see some selling as the day wore on, and no deal was announced out of DC. That 3400 area, or just below it, has become some resistance as it is the highs from last February as we mentioned yesterday. But I also see that 3425 area as a possible neckline of an inverted head and shoulders pattern. If that turns out to be the case, we could be seeing the right shoulder forming now. An inverted H&S would be bullish eventually, but if we do get a full right shoulder formed it could come down to fill that open gap before turning back up. That would be ideal for the technicians out there.
The DWCPF (S-fund) had a huge day and the index moved up to the prior high in September near 1580. Is that a range that is going to hold or will we see a breakout? To keep things nice and neat, I would prefer to see the open gap near 1520 get filled before it heads back to the early September highs, otherwise we'd always have to be concerned about if and when that gap does eventually get filled.
The EFA (I-fund) closed back above the 50-day EMA yesterday, so that keeps flip-flopping, and that is key since the rising trading channel already broke, and the 50-day EMA really would have to hold or we would be looking at a more serious breakdown. The 200-day EMA is there and held once, but the cracks are getting wider.
The Dow Transportation Index was down again yesterday, bucking the bullish trend of the rest of the market. The Transports are a more economically sensitive index so perhaps it was the jobless claims that held it back, because we saw other economically sensitive vehicles fall as well yesterday.
The price of oil and copper tanked on Thursday and it wasn't like that was caused by the dollar. The level where they fell from are significant as both now failed to stay above their 50-day averages. Lumber was up, but we know what happened to it in September, and it wasn't pretty.
BND (F-fund) traded below its 50-day EMA for a second day, but keeps hanging around it, and remains in that trading channel.
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.
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[TD="align: center"] Daily TSP Funds Return
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[/TD]
[TD][/TD]
[TD="align: center"]
[/TR]
[/TABLE]
The advance / decline issues and volume were decisively positive, but typical for a modestly positive day.
We saw the initial jobless claims come in a little higher than estimated yesterday and that leads us into today's jobs report as we get the September numbers this morning (Friday) and estimates are looking for a gain of 800,000 jobs, and an unemployment rate of 8.2%.
That could be a market mover but FOMO (fear of missing out) seems to be helping keep the stock market buoyant as the stimulus package negotiations continue.
I know that I sometimes get a little too focused on seasonality, something that is almost always just a slight advantage or disadvantage for stocks, except for maybe around major holidays. But this election year chart has been too compelling for me to ignore. Obviously it is not going to be exact as we are dealing with average returns here, but look at the similarity over the last 3 months that we are seeing between the S&P 500 chart compared to the average election year chart.
I'm intrigued by the second low in the descending channel, which came in September, where the election year average chart saw that closer to mid-October. The open gap near 3305 is one key reasons why I believe we could see another dip before a full breakout, which on the election year chart comes closer to Halloween. But if we do get a stimulus package passed, perhaps we won't be waiting that long for a breakout.
As we talked about, politically it doesn't make a whole lot of sense to expect the democrats to make any kind of deal before the election that could benefit President Trump, unless they can get something in the bill that will give them a victory as well. The republicans are not only balking at the size of the stimulus package, but also the democrat's attempt in their bill to extend stimulus checks to illegal immigrants and give deportation protections in certain “essential” jobs. So it's going to be interesting to see how they resolve this - if they can.
I kind of believe that investors who think this deal is going to get made soon, may be overly optimistic. As far as how that impacts us market timers, it should keep volatility high and that usually means better trading opportunities. By the way, the VIX (volatility index) was actually up 1.25% yesterday, which was the 2nd day in a row it was up when stocks were up as well, which is on the unusual side.
Update 1:55 AM ET: You may have heard that President Trump and First Lady Melania have tested positive for COVID, and that could change the complexion of the day. We wish them well.
The S&P 500 (C-fund) was up a solid 0.53% on Thursday, but that was about half of the opening bell highs so we did see some selling as the day wore on, and no deal was announced out of DC. That 3400 area, or just below it, has become some resistance as it is the highs from last February as we mentioned yesterday. But I also see that 3425 area as a possible neckline of an inverted head and shoulders pattern. If that turns out to be the case, we could be seeing the right shoulder forming now. An inverted H&S would be bullish eventually, but if we do get a full right shoulder formed it could come down to fill that open gap before turning back up. That would be ideal for the technicians out there.
The DWCPF (S-fund) had a huge day and the index moved up to the prior high in September near 1580. Is that a range that is going to hold or will we see a breakout? To keep things nice and neat, I would prefer to see the open gap near 1520 get filled before it heads back to the early September highs, otherwise we'd always have to be concerned about if and when that gap does eventually get filled.
The EFA (I-fund) closed back above the 50-day EMA yesterday, so that keeps flip-flopping, and that is key since the rising trading channel already broke, and the 50-day EMA really would have to hold or we would be looking at a more serious breakdown. The 200-day EMA is there and held once, but the cracks are getting wider.
The Dow Transportation Index was down again yesterday, bucking the bullish trend of the rest of the market. The Transports are a more economically sensitive index so perhaps it was the jobless claims that held it back, because we saw other economically sensitive vehicles fall as well yesterday.
The price of oil and copper tanked on Thursday and it wasn't like that was caused by the dollar. The level where they fell from are significant as both now failed to stay above their 50-day averages. Lumber was up, but we know what happened to it in September, and it wasn't pretty.
BND (F-fund) traded below its 50-day EMA for a second day, but keeps hanging around it, and remains in that trading channel.
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.
