Stocks opened tentatively on Monday and we saw red numbers early on, but once the rally ensued, the stampede started, and the FOMO (fear of missing out) buyers went all in. The Dow ended with a record gain of 1294-points with monstrous percentage gains across the board in U.S. stocks, although the Transports were a little late to the party.
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In Monday's commentary we talked about getting an explosive rally at some point, and investors couldn't take it any longer, going full force after an initial sell-off. It was just a matter of time, but now the game gets interesting.
Do we take off from here?
Does the rally fail immediately?
Do we rally a bit more than rollover to test the lows?
All of them are viable responses from here.
If you were waiting for some kind of sign of a bottom before you bought, you missed the explosive rally. If you anticipated the low but did so before Friday, you're still down on the trade.
If you made your IFT to buy on Friday morning, you were juuust right.
At this point there's some guessing involved, and a lot of that will have to do with how bad you think that the coronavirus numbers get. If the cases stay at reasonable low numbers in the U.S., the market can probably shake it off. If we see an explosion of cases and deaths, the market could easily rollover again.
Another factor that you probably have one day (today) to act on, is who you think will be the big winner in Super Tuesday's primaries. If it's Bernie Sanders the market may get a little cranky again on Wednesday. If Joe Biden, or even Mike Bloomberg do well, the market may be more relieved. But then again, it could be the opposite depending on who investors think President Trump would have an easier time running against. Biden may be better for the market than Sanders, but Trump may have a easier time beating Sanders. Or dissect it anyway you think it could go, but the market will likely react to it on Wednesday.
Combine that with rising coronavirus cases, and I don't think the volatility is quite done yet.
The S&P 500 (C-fund) filled Friday's open gap and closed in on the one near 3100. It recaptured the 200-day EMA which can be a crucial roadblock for a rebound, but it's still close enough that I wouldn't call it confirmed yet. The bears aren't done, but the question is whether the bulls can out battle them now that we're off some of the most extreme oversold conditions.
The small caps of the DWCPF (S-fund) lagged a bit but still had a big 3% gain on the day. It is still below the 200-day EMA but if this rally continues, and that's a big if, investors will eventually look for the better values and small caps may come back in favor. For now, they were all over the large bellwethers as the panic was on the buying side this time.
The Dow Transportation Index lagged all day and didn't turn positive until much later in the day. It didn't even gain 1% yesterday, but there are now two positive reversal patterns on the chart. That's a plus and could attract value investors after the airline stocks were destroyed in the correction.
The EFA (I-fund) was up and has a lot further to go if the bears don't step in first. The dollar was down sharply, which should help the I-fund, but it also reversed to the upside by the close.
The AGG (bonds / F-fund) was up big early but reversed down as stocks rallied. We saw that the other day and they just turned right back up the next day so bond bulls aren't giving up that easily.
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][/TD]
[TD="align: center"]
[/TR]
[/TABLE]
In Monday's commentary we talked about getting an explosive rally at some point, and investors couldn't take it any longer, going full force after an initial sell-off. It was just a matter of time, but now the game gets interesting.
Do we take off from here?
Does the rally fail immediately?
Do we rally a bit more than rollover to test the lows?
All of them are viable responses from here.
If you were waiting for some kind of sign of a bottom before you bought, you missed the explosive rally. If you anticipated the low but did so before Friday, you're still down on the trade.
If you made your IFT to buy on Friday morning, you were juuust right.
At this point there's some guessing involved, and a lot of that will have to do with how bad you think that the coronavirus numbers get. If the cases stay at reasonable low numbers in the U.S., the market can probably shake it off. If we see an explosion of cases and deaths, the market could easily rollover again.
Another factor that you probably have one day (today) to act on, is who you think will be the big winner in Super Tuesday's primaries. If it's Bernie Sanders the market may get a little cranky again on Wednesday. If Joe Biden, or even Mike Bloomberg do well, the market may be more relieved. But then again, it could be the opposite depending on who investors think President Trump would have an easier time running against. Biden may be better for the market than Sanders, but Trump may have a easier time beating Sanders. Or dissect it anyway you think it could go, but the market will likely react to it on Wednesday.
Combine that with rising coronavirus cases, and I don't think the volatility is quite done yet.
The S&P 500 (C-fund) filled Friday's open gap and closed in on the one near 3100. It recaptured the 200-day EMA which can be a crucial roadblock for a rebound, but it's still close enough that I wouldn't call it confirmed yet. The bears aren't done, but the question is whether the bulls can out battle them now that we're off some of the most extreme oversold conditions.
The small caps of the DWCPF (S-fund) lagged a bit but still had a big 3% gain on the day. It is still below the 200-day EMA but if this rally continues, and that's a big if, investors will eventually look for the better values and small caps may come back in favor. For now, they were all over the large bellwethers as the panic was on the buying side this time.
The Dow Transportation Index lagged all day and didn't turn positive until much later in the day. It didn't even gain 1% yesterday, but there are now two positive reversal patterns on the chart. That's a plus and could attract value investors after the airline stocks were destroyed in the correction.
The EFA (I-fund) was up and has a lot further to go if the bears don't step in first. The dollar was down sharply, which should help the I-fund, but it also reversed to the upside by the close.
The AGG (bonds / F-fund) was up big early but reversed down as stocks rallied. We saw that the other day and they just turned right back up the next day so bond bulls aren't giving up that easily.
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.
