Stocks gave back some of Tuesday's gains yesterday, after a bit of a wake up call from earnings and economic data. The Dow lost 445-points, small caps lagged losing more than 3%, while the Nasdaq led again with big tech names like Amazon, Netflix, and Tesla all closing with strong gains.
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Some kick off earnings reports from companies like Goldman Sachs and Wells Fargo came in worse than expected, and a series of economic reports may have given investors a wake up call after they were eagerly jumping back into stocks for the last few weeks.
As we've talked about repeatedly, bear market rallies can be explosive, and they can last longer than seems possible, but investors must have needed something to remind them that we are in a bear market.
The rally may not be over, I don't know. The losses yesterday didn't even erase Tuesday's gains, but now earnings season is getting started, and the highly anticipated economic reports are coming out, and we may get a dose of reality after March's anticipatory sell off to this data, and the subsequent relief rally.
Chart source: https://www.cnbc.com
Some of those declines listed actually surprised me because I thought they could be worse. That's not a scientific opinion, just from my own experience from not having done much of anything over the last month, since the shutdown began.
Yes, the reaction is more about how the results stack up to expectations rather than the actual data, but if the early numbers are indicative, so far they've been worse than estimates.
The price of oil seems more representative of what's been happening with it being down more than 60% since the February highs, and yesterday it closed below $20 for the first time in almost 20 years at it tests the prior lows.
The index charts are in vulnerable positions as far as nearing significant resistance areas in a bear market. Yesterday's decline didn't do anything to damage the charts except that it was a missed opportunity from the bulls to break through that resistance, but it's close to a do or die situation for the relief rally in stocks.
The S&P 500 (C-fund) fell back below the 50-day EMA after closing above it for one day. There are a few other potential upside targets above the 50-day EMA including the open gap near 2900 and the 200-day EMA currently at 2961, but it's a bear market and that 50-day EMA could be a tough test.
The DWCPF (S-fund) shows a fairly distinct bear flag formation fully formed. Bear market rallies can last a lot longer than we'd expect so how far it goes, I don't know, but again the 50-day EMA can be a rally killer.
The Dow Transportation Index - same situation. I doubt there are lines in the airports these days, but I suppose companies like UPS and Fed Ex might be doing OK with everyone buying online.
The EFA (I-fund) chart looks very similar to the others although the apex of that bearish flag or rising wedge, is getting squeezed and something is going to have to give soon.
The High Yield Corporate Bond Fund was down sharply, but it closed well off its lows after bouncing off of the 50-day EMA, which it had impressively broken above last week. However the 200-day EMA held as resistance after it filled that open gap and backed off.
BND (F-fund equivalent ETF) was up nicely and it is now right near the all time closing high from back in early March - just below 88. The intraday high is over 89 and if it can get there, which it seems to be trying to do, that would be a gain of over 1.5%. That sounds enticing for the F-fund for those who may be in the G-fund, but is it worth the risk with the possibility of a double top pullback if it does test the highs?
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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Some kick off earnings reports from companies like Goldman Sachs and Wells Fargo came in worse than expected, and a series of economic reports may have given investors a wake up call after they were eagerly jumping back into stocks for the last few weeks.
As we've talked about repeatedly, bear market rallies can be explosive, and they can last longer than seems possible, but investors must have needed something to remind them that we are in a bear market.
The rally may not be over, I don't know. The losses yesterday didn't even erase Tuesday's gains, but now earnings season is getting started, and the highly anticipated economic reports are coming out, and we may get a dose of reality after March's anticipatory sell off to this data, and the subsequent relief rally.
Chart source: https://www.cnbc.com
Some of those declines listed actually surprised me because I thought they could be worse. That's not a scientific opinion, just from my own experience from not having done much of anything over the last month, since the shutdown began.
Yes, the reaction is more about how the results stack up to expectations rather than the actual data, but if the early numbers are indicative, so far they've been worse than estimates.
The price of oil seems more representative of what's been happening with it being down more than 60% since the February highs, and yesterday it closed below $20 for the first time in almost 20 years at it tests the prior lows.
The index charts are in vulnerable positions as far as nearing significant resistance areas in a bear market. Yesterday's decline didn't do anything to damage the charts except that it was a missed opportunity from the bulls to break through that resistance, but it's close to a do or die situation for the relief rally in stocks.
The S&P 500 (C-fund) fell back below the 50-day EMA after closing above it for one day. There are a few other potential upside targets above the 50-day EMA including the open gap near 2900 and the 200-day EMA currently at 2961, but it's a bear market and that 50-day EMA could be a tough test.
The DWCPF (S-fund) shows a fairly distinct bear flag formation fully formed. Bear market rallies can last a lot longer than we'd expect so how far it goes, I don't know, but again the 50-day EMA can be a rally killer.
The Dow Transportation Index - same situation. I doubt there are lines in the airports these days, but I suppose companies like UPS and Fed Ex might be doing OK with everyone buying online.
The EFA (I-fund) chart looks very similar to the others although the apex of that bearish flag or rising wedge, is getting squeezed and something is going to have to give soon.
The High Yield Corporate Bond Fund was down sharply, but it closed well off its lows after bouncing off of the 50-day EMA, which it had impressively broken above last week. However the 200-day EMA held as resistance after it filled that open gap and backed off.
BND (F-fund equivalent ETF) was up nicely and it is now right near the all time closing high from back in early March - just below 88. The intraday high is over 89 and if it can get there, which it seems to be trying to do, that would be a gain of over 1.5%. That sounds enticing for the F-fund for those who may be in the G-fund, but is it worth the risk with the possibility of a double top pullback if it does test the highs?
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.
