After the worst report last month, we got the strongest employment report in the history of the country on Friday with 2.5 million jobs being created. What made it even more impressive was that the so called experts were expecting a loss of 8.5 million. The market reacted with an explosive rally. The Dow gained 829-points and we saw gains of 2% to 3% in most of the indices.
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Having the estimates off by 11 million (+2.5m actual vs. -8.5m expected) is absurd, and in some cases off by 13.5 million (briefing.com had a forecast of a loss of 11 million jobs). An upside or downside surprise of 50,000 used to be a big beat or miss, so 11 million isn't even on the charts of surprises. Very suspicious. Not that I don't think a gain of 2.5 million jobs was possible after the dramatic losses we've seen in the prior months, but how is it nobody saw it coming? The economy was basically still shut down during most of May so I can see that expectations were low, but whatever the forecasters were watching was not what was happening.
Either way, we still have double digit unemployment numbers (13.3%, although some say it was actually closer to 16% based on a calculation error), but that is obviously improving from expectations. We never did get the 20% - 30% that we were told would happen. briefing.com had forecast a 21% unemployment rate for May. So, unless we get a major second wave of the COVID virus, we most likely won't see 20% any time soon.
I'm not sure how to proceed here explaining my thoughts without getting overly political. It is too sensitive to discuss and this isn't the place for it. But let's just say, with 5 months to go before the election, in a country that couldn't be more divided, we are going to see everything thrown at us from both parties. No holds barred. Since people tend to vote with their wallets, one party cannot afford to see the economy come roaring right back to where it was, and one cannot afford to see another wave of COVID-19, or anything else, to shut the economy down again. One will try to have you believe that the country is going to hell in hand basket, and the other that we are living in the greatest of times. The truth is somewhere in the middle and that's for you to decide, but we saw what happened to the stock market in the first 5+ months of the year. What could the next 5 months bring? Be ready. I doubt it will be quiet.
I see some very positive stats based on prior performances, and some troubling ones, but a lot of that is based on "typical" market environments. But as I said, this is anything but a typical time for our country, the economy, and the stock market, so I don't know if anyone is comfortable predicting what the next 5 months will bring.
The S&P 500 (C-fund) continues to push forward, so far breaking though every line of defense the resistance areas have thrown at it. The high on Friday was another area of resistance, and it did dip back some from those highs, but that resistance is rising. Yet another open gap was created and that makes 4 significant open gaps on the downside of this chart - very rare - and one large upside gap remains open just off the all-time highs.
The weekly chart shows a possible upside target where a plethora of resistance meets, but as I have mentioned with regard to this chart many times, once it gets outside of the red parallel trading channel (the blue circles), which is going back more than a couple of years, it has a tendency to want to snap back into it.
The DWCPF (S-fund) is still off its all-time highs but heading in that direction, and that open gap is there for the taking if it still has the strength. I didn't mark them all but this chart also has several open gaps on the downside that may eventually get filled, with the lowest down near 950. My guess is that some day it should be filled. It could take years, however.
The Nasdaq has now made a full recover, recapturing all of its bear market losses. We now have a setup for a breakout, or a double top pullback. Place your bets!
The Dow Transportation Index blasted off with a 3% gain on Friday but it actually closed well off the highs after hitting 10,000 to create a negative reversal day. The 9500 area could be an easy downside target on any pullback, but there is a lot of support now in that area, that will be key if tested.
The EFA (I-fund) - same deal. It's above some key resistance, which could act as support on any pullback, but if that support fails, it could fall hard.
The BND (F-fund) was down very sharply early on Friday but came roaring back to close about even on the day. That's a nice positive reversal but technically the chart broke down from several layers of support in the last week or so. We'll have to see if any short-term oversold conditions can create a little bounce here.
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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Having the estimates off by 11 million (+2.5m actual vs. -8.5m expected) is absurd, and in some cases off by 13.5 million (briefing.com had a forecast of a loss of 11 million jobs). An upside or downside surprise of 50,000 used to be a big beat or miss, so 11 million isn't even on the charts of surprises. Very suspicious. Not that I don't think a gain of 2.5 million jobs was possible after the dramatic losses we've seen in the prior months, but how is it nobody saw it coming? The economy was basically still shut down during most of May so I can see that expectations were low, but whatever the forecasters were watching was not what was happening.
Either way, we still have double digit unemployment numbers (13.3%, although some say it was actually closer to 16% based on a calculation error), but that is obviously improving from expectations. We never did get the 20% - 30% that we were told would happen. briefing.com had forecast a 21% unemployment rate for May. So, unless we get a major second wave of the COVID virus, we most likely won't see 20% any time soon.
I'm not sure how to proceed here explaining my thoughts without getting overly political. It is too sensitive to discuss and this isn't the place for it. But let's just say, with 5 months to go before the election, in a country that couldn't be more divided, we are going to see everything thrown at us from both parties. No holds barred. Since people tend to vote with their wallets, one party cannot afford to see the economy come roaring right back to where it was, and one cannot afford to see another wave of COVID-19, or anything else, to shut the economy down again. One will try to have you believe that the country is going to hell in hand basket, and the other that we are living in the greatest of times. The truth is somewhere in the middle and that's for you to decide, but we saw what happened to the stock market in the first 5+ months of the year. What could the next 5 months bring? Be ready. I doubt it will be quiet.
I see some very positive stats based on prior performances, and some troubling ones, but a lot of that is based on "typical" market environments. But as I said, this is anything but a typical time for our country, the economy, and the stock market, so I don't know if anyone is comfortable predicting what the next 5 months will bring.
The S&P 500 (C-fund) continues to push forward, so far breaking though every line of defense the resistance areas have thrown at it. The high on Friday was another area of resistance, and it did dip back some from those highs, but that resistance is rising. Yet another open gap was created and that makes 4 significant open gaps on the downside of this chart - very rare - and one large upside gap remains open just off the all-time highs.
The weekly chart shows a possible upside target where a plethora of resistance meets, but as I have mentioned with regard to this chart many times, once it gets outside of the red parallel trading channel (the blue circles), which is going back more than a couple of years, it has a tendency to want to snap back into it.
The DWCPF (S-fund) is still off its all-time highs but heading in that direction, and that open gap is there for the taking if it still has the strength. I didn't mark them all but this chart also has several open gaps on the downside that may eventually get filled, with the lowest down near 950. My guess is that some day it should be filled. It could take years, however.
The Nasdaq has now made a full recover, recapturing all of its bear market losses. We now have a setup for a breakout, or a double top pullback. Place your bets!
The Dow Transportation Index blasted off with a 3% gain on Friday but it actually closed well off the highs after hitting 10,000 to create a negative reversal day. The 9500 area could be an easy downside target on any pullback, but there is a lot of support now in that area, that will be key if tested.
The EFA (I-fund) - same deal. It's above some key resistance, which could act as support on any pullback, but if that support fails, it could fall hard.
The BND (F-fund) was down very sharply early on Friday but came roaring back to close about even on the day. That's a nice positive reversal but technically the chart broke down from several layers of support in the last week or so. We'll have to see if any short-term oversold conditions can create a little bounce here.
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.
