We got some follow through to Monday's big rally on Tuesday, which is a good sign but a little selling at resistance pushed the indices well off their highs so it wasn't as easy as it sounds. Still, gains of near 1% was the theme by the close and the bulls will take that in this bear market environment. Bonds were up as the dollar and the 10-year yield were down slightly.
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If someone asked me on Monday night how I would feel if the stock market indices moved up another 1% on Tuesday, I would have been very happy to accept that gain. But when stocks gapped up 2% and closed up just 1%, there was a little disappointment created. That's not the worst thing for a rally. You like to see stocks move up while fear is still in the room - climb the wall of worry, if you will, but that term is more common to hear in bull markets. Still, the action was good, but it is keeping investors on edge.
One of the upside targets in the S&P 500 was the open gap from October 7, which was the low on the 6th at 3739. The S&P not only filled that gap with another 70-point gap up at the open yesterday, but it then retreated to fill the large point gap it just opened, satisfying both gaps before coming back to close up 1.1%. That's quite a productive day. Also, notice gap from back on October 4. It's basically in the same vicinity so this is an important area on this chart and getting above it will be a key development for the bulls if they can do it, or a brick wall for the bears if they can hold it here.
By the way, the futures moved up more than 20 S&P 500 points after the bell yesterday after some strong earnings reports from Netflix and United Airlines, so the breeze will start at the backs of the bulls on Wednesday.
The last two days saw some impressive breadth ratios with advancers easily outperforming the decliners, and the volume breadth was more than 10 to 1 in favor of the advancing volume on the NYSE on Monday. That's outstanding and nearly telling us that more upside is very possible. It is a bear market so having some skepticism is healthy, but those are good signs.
The yield on the 10-year pushed above 4% again but settle just below it as it continues to flirt with that area, and the longer it hangs around the better chance there is of a breakout, which could throw some water on the stock market rally if it does.
Earnings have been fine, not great but maybe better than expected overall. Next week we get earnings from the FAANG / MAGA companies - whatever acronym they are using these days for the biggest tech companies in the world, and that could make or break the bear market rally. Netflix started it off last night as I mentioned, as the "N" in FAANG, but coming up are the likes of Apple, Amazon Facebook aka Meta, Google, and Microsoft, which are the market moving behemoths.
Like I said the other day, in the early stages of a relief rally in a bear market it is difficult to know if we are seeing the start of a modest 5% rally or a 10%, or even 20% move, so when to sell becomes the big question. With our limited IFTs each month there are no do-overs if we sell too early. You have to wait for the next month to buy back in again so selling an early rally almost forces you to lock in a small gain, or take on more risk than perhaps we want to.
The S&P 500 (C-fund) filled that open gap from October 7th and in doing so it pushed above one layer of resistance coming off the August highs. There's a lot more resistance overhead but its another 90-points until the 50-day EMA and another resistance line is tested. The resistance is falling fast so those upside targets get lower with each passing day. The next open gap is all the way up by 4070 and too much can happen, or too much has to happen, in the short-term to consider that a target yet.
The DWCPF (S-fund) led on the upside, filled its open gap and broke above one of the descending resistance lines. There is a manageable open gap near 1675, but this would have to get above its 50-day EMA to do so, and that's not always easy in a bear market.
The BND (bonds / F-fund) was up slightly as yields eased earlier in the day, but this is still nearly pinned to its 2022 lows and that's not a great sign. It's as if the bond traders are not expecting a rally here and perhaps believe yields will go higher before pulling back. I will feel better about this stock market rally if this can get over 71.
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 so much 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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If someone asked me on Monday night how I would feel if the stock market indices moved up another 1% on Tuesday, I would have been very happy to accept that gain. But when stocks gapped up 2% and closed up just 1%, there was a little disappointment created. That's not the worst thing for a rally. You like to see stocks move up while fear is still in the room - climb the wall of worry, if you will, but that term is more common to hear in bull markets. Still, the action was good, but it is keeping investors on edge.
One of the upside targets in the S&P 500 was the open gap from October 7, which was the low on the 6th at 3739. The S&P not only filled that gap with another 70-point gap up at the open yesterday, but it then retreated to fill the large point gap it just opened, satisfying both gaps before coming back to close up 1.1%. That's quite a productive day. Also, notice gap from back on October 4. It's basically in the same vicinity so this is an important area on this chart and getting above it will be a key development for the bulls if they can do it, or a brick wall for the bears if they can hold it here.
By the way, the futures moved up more than 20 S&P 500 points after the bell yesterday after some strong earnings reports from Netflix and United Airlines, so the breeze will start at the backs of the bulls on Wednesday.
The last two days saw some impressive breadth ratios with advancers easily outperforming the decliners, and the volume breadth was more than 10 to 1 in favor of the advancing volume on the NYSE on Monday. That's outstanding and nearly telling us that more upside is very possible. It is a bear market so having some skepticism is healthy, but those are good signs.
The yield on the 10-year pushed above 4% again but settle just below it as it continues to flirt with that area, and the longer it hangs around the better chance there is of a breakout, which could throw some water on the stock market rally if it does.
Earnings have been fine, not great but maybe better than expected overall. Next week we get earnings from the FAANG / MAGA companies - whatever acronym they are using these days for the biggest tech companies in the world, and that could make or break the bear market rally. Netflix started it off last night as I mentioned, as the "N" in FAANG, but coming up are the likes of Apple, Amazon Facebook aka Meta, Google, and Microsoft, which are the market moving behemoths.
Like I said the other day, in the early stages of a relief rally in a bear market it is difficult to know if we are seeing the start of a modest 5% rally or a 10%, or even 20% move, so when to sell becomes the big question. With our limited IFTs each month there are no do-overs if we sell too early. You have to wait for the next month to buy back in again so selling an early rally almost forces you to lock in a small gain, or take on more risk than perhaps we want to.
The S&P 500 (C-fund) filled that open gap from October 7th and in doing so it pushed above one layer of resistance coming off the August highs. There's a lot more resistance overhead but its another 90-points until the 50-day EMA and another resistance line is tested. The resistance is falling fast so those upside targets get lower with each passing day. The next open gap is all the way up by 4070 and too much can happen, or too much has to happen, in the short-term to consider that a target yet.
The DWCPF (S-fund) led on the upside, filled its open gap and broke above one of the descending resistance lines. There is a manageable open gap near 1675, but this would have to get above its 50-day EMA to do so, and that's not always easy in a bear market.
The BND (bonds / F-fund) was up slightly as yields eased earlier in the day, but this is still nearly pinned to its 2022 lows and that's not a great sign. It's as if the bond traders are not expecting a rally here and perhaps believe yields will go higher before pulling back. I will feel better about this stock market rally if this can get over 71.
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 so much 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.
