Stocks were down on Friday to end a choppy, mixed month for stocks. The Dow lost 149-points and many indices experienced similar percentage losses. Amazon disappointed investors with their earnings after the bell on Thursday and that bled into Friday putting a dark cloud over the market. Now we head into some seasonal issues for stocks, but has that been over played?
[TABLE="align: center"]
[TR]
[TD="align: center"] Daily TSP Funds Return
[TABLE="align: center"]
[TR]
[TD="align: right"][/TD]
[/TR]
[/TABLE]
[/TD]
[TD]
[/TD]
[TD="align: center"]
[/TD]
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For the month, July came in a little mixed because small caps lagged quite a bit, otherwise we saw solid gains for the S&P 500 (C-fund, +2.37%) and modest gains for the I-fund (+.072%), and bonds (F) also made a good run gaining over 1%.
[TD="width: 68, align: center"] F Fund[/TD]
[TD="width: 68, align: center"] C Fund[/TD]
[TD="width: 68, align: center"] S Fund[/TD]
[TD="width: 68, align: center"] I Fund[/TD]
[TR]
[TD="align: center"] +0.13%[/TD]
[TD="align: center"] +1.15%[/TD]
[TD="align: center"] +2.37%[/TD]
[TD="align: center"] -1.24%[/TD]
[TD="align: center"] +0.72%[/TD]
[/TR]
[/TD]
[TD]
[/TD]
[/TR]
[/TABLE]
That's 6 straight positive months for the S&P 500 as we head into August. August and September have a reputation, based on historical data, that they can be tough months for the market, and with the market probably due for a rest... But there has been a lot of talk about that weakness so I am a little skeptical that it will work out the way that so many people are suspecting. That doesn't mean I'm bullish. I expect weakness too, but I am always aware that the market tries to fool as many of us as it can.
While earnings season has a way to go before it's over, most of the market moving companies have already reported. Plus the FOMC meeting is out of the way so the market may be looking for a catalyst during the summer doldrums. We do have infrastructure bills being negotiated and that could be a catalyst this week.
Taking a broader look at the S&P 500 and where it sits, these longer term monthly charts may give us some prospective about how far stocks have come, and perhaps how extended the index is.
Some of the chart below are are logarithmic, meaning the lines are adjusted for percentage gains rather than point gains, but I'll use linear charts (points) for dramatic purposes on some....
This one shows the long term trading channel coming off the highs of 2010 and the low of 2011. We saw a couple of extremes on the downside that turned out to be great buying opportunities, but right now we're seeing the chart pressing the top resistance line of this 12-year chart.
This one goes back before the financial crisis to the top of the market in 2007 before the bear market began. Again, we're seeing the upper resistance line being tagged on the red channel, and it is well above the blue resistance line, which may be an eventual downside target some day, but that would be a dramatic move and likely only come if we see another devastating bear market at some point.
That one above is a logarithmic chart, but here is the linear chart for that same period. Ahem.
Here's the logarithmic chart going back to the mid-1980's. It shows just how long stocks can stay extended but that both the dot com bubble in 2000 and the financial crisis eventually brought things back toward reality. You can see we're getting extended again, but it's tough to say when the market will flush this one out. It will happen, but when?
How about the linear chart of that same period. Getting nervous?
We get the July jobs report on Friday and estimates are looking for a lofty 925,000 new jobs being added, and an unemployment rate of 5.6%
Admin Note: We are having a heck of time successfully sending email to gmail accounts. Because we send a lot of alerts to premium subscribers and other email reminder notifications (by request) the amount of email that we send must be sending red flags to gmail. This is particularly an issue for Last Look subscribers since the relevant information is right in the email. If you are not getting our alerts / notifications, you may need to either check your spam folders. If the emails are in there you can try to set it as "not spam." Here is more info that could help: https://www.tsptalk.com/anti_spam_instructions.html
The S&P 500 (C-fund) just made a new all time high on Thursday but it backed off on Friday. It certainly looks like it may need another dip after being pinned to the upper resistance line for several days, but new months tend to have some new money coming in, so you never know. However, August is different, as we talked about above. The PMO indicator below shows yet another lower high while the S&P made another higher high. More negative divergences, which so far haven't meant much, but historically it can be a sign of trouble.
The DWCPF (S-fund) continues to have trouble at that upper resistance line despite breaking above it once already in late June.
The EFA / I-fund retreated with the rest of the market on Friday, and filled an open gap in the process. The bear flag already broke down and since it has risen back to the top of that flag, and so far has stalled again in that area near 80.
The Dow Transportation Index is also struggling with a possible small bear flag forming below the 100-day EMA, after failing at the 50-day EMA for a second time.
The BND (bonds / F-fund) has been in what looks like a small bear flag for several days now, ever since breaking above that large rising trading channel. But the fact that bonds won't rollover, meaning yields are staying low, may be a warning sign for the economy. But if that bear flag breaks down, and it goes back into the channel, that would be more encouraging.
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.
[TABLE="align: center"]
[TR]
[TD="align: center"] Daily TSP Funds Return
[TR]
[TD="align: right"][/TD]
[/TR]
[/TABLE]
[/TD]
[TD]
[/TD]
[TD="align: center"]
[/TR]
[/TABLE]
For the month, July came in a little mixed because small caps lagged quite a bit, otherwise we saw solid gains for the S&P 500 (C-fund, +2.37%) and modest gains for the I-fund (+.072%), and bonds (F) also made a good run gaining over 1%.
| [TABLE="width: 320"] [TR] [TD="width: 68, align: center"] G Fund |
[TD="width: 68, align: center"] F Fund[/TD]
[TD="width: 68, align: center"] C Fund[/TD]
[TD="width: 68, align: center"] S Fund[/TD]
[TD="width: 68, align: center"] I Fund[/TD]
[TR]
[TD="align: center"] +0.13%[/TD]
[TD="align: center"] +1.15%[/TD]
[TD="align: center"] +2.37%[/TD]
[TD="align: center"] -1.24%[/TD]
[TD="align: center"] +0.72%[/TD]
[/TR]
[/TD]
[TD]
[/TD]
[/TR]
[/TABLE]
That's 6 straight positive months for the S&P 500 as we head into August. August and September have a reputation, based on historical data, that they can be tough months for the market, and with the market probably due for a rest... But there has been a lot of talk about that weakness so I am a little skeptical that it will work out the way that so many people are suspecting. That doesn't mean I'm bullish. I expect weakness too, but I am always aware that the market tries to fool as many of us as it can.
While earnings season has a way to go before it's over, most of the market moving companies have already reported. Plus the FOMC meeting is out of the way so the market may be looking for a catalyst during the summer doldrums. We do have infrastructure bills being negotiated and that could be a catalyst this week.
Taking a broader look at the S&P 500 and where it sits, these longer term monthly charts may give us some prospective about how far stocks have come, and perhaps how extended the index is.
Some of the chart below are are logarithmic, meaning the lines are adjusted for percentage gains rather than point gains, but I'll use linear charts (points) for dramatic purposes on some....
This one shows the long term trading channel coming off the highs of 2010 and the low of 2011. We saw a couple of extremes on the downside that turned out to be great buying opportunities, but right now we're seeing the chart pressing the top resistance line of this 12-year chart.
This one goes back before the financial crisis to the top of the market in 2007 before the bear market began. Again, we're seeing the upper resistance line being tagged on the red channel, and it is well above the blue resistance line, which may be an eventual downside target some day, but that would be a dramatic move and likely only come if we see another devastating bear market at some point.
That one above is a logarithmic chart, but here is the linear chart for that same period. Ahem.
Here's the logarithmic chart going back to the mid-1980's. It shows just how long stocks can stay extended but that both the dot com bubble in 2000 and the financial crisis eventually brought things back toward reality. You can see we're getting extended again, but it's tough to say when the market will flush this one out. It will happen, but when?
How about the linear chart of that same period. Getting nervous?
We get the July jobs report on Friday and estimates are looking for a lofty 925,000 new jobs being added, and an unemployment rate of 5.6%
Admin Note: We are having a heck of time successfully sending email to gmail accounts. Because we send a lot of alerts to premium subscribers and other email reminder notifications (by request) the amount of email that we send must be sending red flags to gmail. This is particularly an issue for Last Look subscribers since the relevant information is right in the email. If you are not getting our alerts / notifications, you may need to either check your spam folders. If the emails are in there you can try to set it as "not spam." Here is more info that could help: https://www.tsptalk.com/anti_spam_instructions.html
The S&P 500 (C-fund) just made a new all time high on Thursday but it backed off on Friday. It certainly looks like it may need another dip after being pinned to the upper resistance line for several days, but new months tend to have some new money coming in, so you never know. However, August is different, as we talked about above. The PMO indicator below shows yet another lower high while the S&P made another higher high. More negative divergences, which so far haven't meant much, but historically it can be a sign of trouble.
The DWCPF (S-fund) continues to have trouble at that upper resistance line despite breaking above it once already in late June.
The EFA / I-fund retreated with the rest of the market on Friday, and filled an open gap in the process. The bear flag already broke down and since it has risen back to the top of that flag, and so far has stalled again in that area near 80.
The Dow Transportation Index is also struggling with a possible small bear flag forming below the 100-day EMA, after failing at the 50-day EMA for a second time.
The BND (bonds / F-fund) has been in what looks like a small bear flag for several days now, ever since breaking above that large rising trading channel. But the fact that bonds won't rollover, meaning yields are staying low, may be a warning sign for the economy. But if that bear flag breaks down, and it goes back into the channel, that would be more encouraging.
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.
