Stocks opened higher on Monday and the indices were sailing into late morning with solid gains, but we did see some selling in the afternoon, especially in the lofty S&P 500 and Nasdaq. Small caps were leading the way again and they held onto a good portion of their gains, closing just off their highs. Yields were mostly flat and the dollar was up slightly and that kept the F and I-funds near the flat line as well, but still positive.
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The afternoon action was a little suspect yesterday after the strong morning rally, and as stretched as the S&P 500 and Nasdaq are in the short-term, it wouldn't be a surprise to get at least a pause up here, and maybe even a pullback deep into the channels.
Many of the other smaller, broader, and equal weighted indices have not been stretched but rather they have been consolidating. I had been wonder what would happen to these charts if the S&P 500 decided to pull back. It was just one day but we did see them hold up well yesterday, and in the case of the Equal Weighted S&P 500 Index (RSP), it broke out above a long resistance line. RSP represents the same 500 stocks as the S&P 500, but all stocks are weighted equally rather than by market cap.
The Russell 2000 small caps index didn't breakout yet, but it had a very good day, closing close to the highs of the day, so the afternoon decline in the S&P 500 and Nasdaq didn't impact the small caps much. This is a constructive looking chart and after the big 5-day move, a little rest may need a little rest, although in the past we have seen small caps go on extraordinary runs.
The small caps fund in our TSP did breakout yesterday without a dip at the double top. DWCPF (S-fund) moved above the December highs with a near 1% gain yesterday. We've been watching this chart develop and as nervous as I had been about the market in general, the S and I-fund chart have been building really good looking patterns. Looking out further in the 2nd chart below of the S-fund we saw a near perfect bull flag forming and I would have been very disappointed if this failed, but recent action has been text book.
Going out even further and we see that the small caps are still well off their all time highs. That doesn't mean that they will automatically run up to those levels, but the breakout above that large channel near 1900, that was retested and held, looks like a pretty good bottom.
Why the market is acting so well, I'm not sure. Could be the economy, could be the Fed, the credit market, political, astrology, etc. Whatever it is, the market seems to be sensing it and that could mean something good is brewing out there that we may not be aware of yet.
We will get the CPI this morning, so that could be a market mover. And speaking of movers, bitcoin moved above $50,000 yesterday. What that says about anything, I'm not sure. But it seems to be risk on for some investors.
The S&P 500 (C-fund) broke above its ascending channel last week, which was a sign of being overly stretched. Yesterday's negative reversal could be a warning sign but if the channel's old resistance line can hold as support if tested, it would be fine. Otherwise it wouldn't be too much of a surprise if this pulled back for a bit and retraced some of the recent gains made in February.
The EFA (I-fund) is still in consolidation mode. This is a good looking chart with the inverted head and shoulder basically completely formed. There can be retests of the middle of the head before a breakout on these peatterns, which would be near the 50-day EMA, but the more common outcome of this pattern is a breakout directly off the right shoulder.
BND (bonds / F-fund) was up slightly and this is a good looking bull flag and it is trying to hold at the 50-day EMA. This is one of those where if the 50-day EMA holds, it is likely going to move at least back up to the top of the flag, and it's probably due to break out as well. The more negative possibility is a test of the bottom of the bull flag, which would push it below the 50-day EMA.
Thanks so much for reading! We'll see you back here tomorrow.
Tom Crowley
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
Daily Market Commentary Archives
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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 afternoon action was a little suspect yesterday after the strong morning rally, and as stretched as the S&P 500 and Nasdaq are in the short-term, it wouldn't be a surprise to get at least a pause up here, and maybe even a pullback deep into the channels.
Many of the other smaller, broader, and equal weighted indices have not been stretched but rather they have been consolidating. I had been wonder what would happen to these charts if the S&P 500 decided to pull back. It was just one day but we did see them hold up well yesterday, and in the case of the Equal Weighted S&P 500 Index (RSP), it broke out above a long resistance line. RSP represents the same 500 stocks as the S&P 500, but all stocks are weighted equally rather than by market cap.
The Russell 2000 small caps index didn't breakout yet, but it had a very good day, closing close to the highs of the day, so the afternoon decline in the S&P 500 and Nasdaq didn't impact the small caps much. This is a constructive looking chart and after the big 5-day move, a little rest may need a little rest, although in the past we have seen small caps go on extraordinary runs.
The small caps fund in our TSP did breakout yesterday without a dip at the double top. DWCPF (S-fund) moved above the December highs with a near 1% gain yesterday. We've been watching this chart develop and as nervous as I had been about the market in general, the S and I-fund chart have been building really good looking patterns. Looking out further in the 2nd chart below of the S-fund we saw a near perfect bull flag forming and I would have been very disappointed if this failed, but recent action has been text book.
Going out even further and we see that the small caps are still well off their all time highs. That doesn't mean that they will automatically run up to those levels, but the breakout above that large channel near 1900, that was retested and held, looks like a pretty good bottom.
Why the market is acting so well, I'm not sure. Could be the economy, could be the Fed, the credit market, political, astrology, etc. Whatever it is, the market seems to be sensing it and that could mean something good is brewing out there that we may not be aware of yet.
We will get the CPI this morning, so that could be a market mover. And speaking of movers, bitcoin moved above $50,000 yesterday. What that says about anything, I'm not sure. But it seems to be risk on for some investors.
The S&P 500 (C-fund) broke above its ascending channel last week, which was a sign of being overly stretched. Yesterday's negative reversal could be a warning sign but if the channel's old resistance line can hold as support if tested, it would be fine. Otherwise it wouldn't be too much of a surprise if this pulled back for a bit and retraced some of the recent gains made in February.
The EFA (I-fund) is still in consolidation mode. This is a good looking chart with the inverted head and shoulder basically completely formed. There can be retests of the middle of the head before a breakout on these peatterns, which would be near the 50-day EMA, but the more common outcome of this pattern is a breakout directly off the right shoulder.
BND (bonds / F-fund) was up slightly and this is a good looking bull flag and it is trying to hold at the 50-day EMA. This is one of those where if the 50-day EMA holds, it is likely going to move at least back up to the top of the flag, and it's probably due to break out as well. The more negative possibility is a test of the bottom of the bull flag, which would push it below the 50-day EMA.
Thanks so much for reading! We'll see you back here tomorrow.
Tom Crowley
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
Daily Market Commentary Archives
To get weekly or daily notifications when we post new commentary, sign up HERE.
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.
