Stocks added onto Monday's slide with another oil driven sell-off. The Dow lost 632-points, and as a change of pace the Nasdaq lagged the other indices. Some earnings after the bell may help the Nasdaq today, but we'll see if investors are back in "sell the rally" mode.
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Oil was the main story again yesterday after that dramatic negative price in the May futures market on Monday, but it was the June contract (-36%) that was hammered on Tuesday and the continuous contract price (shown below) was down over 40%. By the way, the May contact moved back into positive territory yesterday.
The price of copper is also a good measuring stick for the economy, and after having drifted higher off the mid-March lows into the descending resistance line, it broke down again yesterday, although it closed well off the lows of the day's dramatic decline.
We got a wave of earnings reports after hours yesterday, and they were surprisingly good - at least the reaction was, as expectations had gotten quite low. Netflix doubled their new subscriber expectations, but of course they are one of the major coronavirus-proof stocks out there, so it is not the best indication of corporate growth in general.
In Monday's commentary, which was reviewing Friday's big rally, we said...
"The rebound off the lows has been more than most of the "test the lows" market timers expected, and that's no shock. The market seems to like to go further than would make people comfortable - to the point where we see one side or the other capitulate. We had a couple of days like that last week where it felt like a capitulation from those expecting a test - they appear to be giving up on that theory, and as is typical of the market, it could mean a shift is coming."
That's how the market rolls. The test of the lows crowd was starting to give up, so of course the rally peaked right after Friday's 700+ point gain in the Dow.
So now what? If we do see a move back toward the lows, the chatter will start to be about whether or not those lows will hold on a test. If that becomes the main message, then maybe we shouldn't be surprised if we don't go all the way down to test the lows. But we're not at that point yet - where people are asking about the lows holding or not, so it's a little too early to say.
The Senate passed a nearly $500 billion bill for small businesses and hospitals after the bell yesterday. A half a trillion here and a half a trillion there, and pretty soon we're talking about some big money.
We did see some slight buying after the bell based on this and those earnings reports that we talked about -- about +0.45% in the S&P 500. If you remember the March trading pattern, we saw a couple of days of sharp losses with a monster rally thrown in there every few days, just to keep us guessing. Be careful.
The S&P 500 (C-fund) fell sharply on Tuesday falling just over 3% on the day. It fell back below the 50-day EMA and the bottom of the bear flag did break its rising support line, but so far it has found some support on the 20-day EMA. If this does rollover to test the lows again we'll probably look at this 2020 chart a year from now and think -- sure, it fell sharply, had a big relief rally up to the moving averages, and rolled over a again. Typical action. But there was certainly nothing easy about playing it, was there?
The DWCPF / S-fund fell deeper into its bear flag after stalling near the top of the flag, and the 50-day EMA. Bear flags tend to break down so that 1100 area is key going forward.
The Nasdaq had been outperforming during this relief rally off the lows to the point where it is still trading above its 50-day EMA and the rising support line, even after yesterday's 3.5% loss. It filled a small open gap with yesterday's losses and with a couple of good earnings reports from Nasdaq companies, it will look to continue to lead by not breaking down like the other indices.
The EFA / I-fund and the Dow Transportation Index are now both trading below their bear flags after stalling at the 50-day EMA, and this is obviously a bad indication for the two.
The VIX was up again on Thursday but even though the indices closed near the lows of the day, the VIX did come off the day's highs to give back about half of Thursday's intraday gains. Still, it's above 40 and above the resistance line so this is a bearish scenario for stocks for now.
The BND / F-fund was up yesterday and remains quite buoyant. It seems like the bond market has been bracing for another push lower in yields and a push down in stocks, well before the stock market showed ay indications.
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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[TR]
[TD="align: center"] Daily TSP Funds Return
[TR]
[TD="align: right"] [/TD]
[/TR]
[/TABLE]
[/TD]
[TD][/TD]
[TD="align: center"]
[/TR]
[/TABLE]
Oil was the main story again yesterday after that dramatic negative price in the May futures market on Monday, but it was the June contract (-36%) that was hammered on Tuesday and the continuous contract price (shown below) was down over 40%. By the way, the May contact moved back into positive territory yesterday.
The price of copper is also a good measuring stick for the economy, and after having drifted higher off the mid-March lows into the descending resistance line, it broke down again yesterday, although it closed well off the lows of the day's dramatic decline.
We got a wave of earnings reports after hours yesterday, and they were surprisingly good - at least the reaction was, as expectations had gotten quite low. Netflix doubled their new subscriber expectations, but of course they are one of the major coronavirus-proof stocks out there, so it is not the best indication of corporate growth in general.
In Monday's commentary, which was reviewing Friday's big rally, we said...
"The rebound off the lows has been more than most of the "test the lows" market timers expected, and that's no shock. The market seems to like to go further than would make people comfortable - to the point where we see one side or the other capitulate. We had a couple of days like that last week where it felt like a capitulation from those expecting a test - they appear to be giving up on that theory, and as is typical of the market, it could mean a shift is coming."
That's how the market rolls. The test of the lows crowd was starting to give up, so of course the rally peaked right after Friday's 700+ point gain in the Dow.
So now what? If we do see a move back toward the lows, the chatter will start to be about whether or not those lows will hold on a test. If that becomes the main message, then maybe we shouldn't be surprised if we don't go all the way down to test the lows. But we're not at that point yet - where people are asking about the lows holding or not, so it's a little too early to say.
The Senate passed a nearly $500 billion bill for small businesses and hospitals after the bell yesterday. A half a trillion here and a half a trillion there, and pretty soon we're talking about some big money.
We did see some slight buying after the bell based on this and those earnings reports that we talked about -- about +0.45% in the S&P 500. If you remember the March trading pattern, we saw a couple of days of sharp losses with a monster rally thrown in there every few days, just to keep us guessing. Be careful.The S&P 500 (C-fund) fell sharply on Tuesday falling just over 3% on the day. It fell back below the 50-day EMA and the bottom of the bear flag did break its rising support line, but so far it has found some support on the 20-day EMA. If this does rollover to test the lows again we'll probably look at this 2020 chart a year from now and think -- sure, it fell sharply, had a big relief rally up to the moving averages, and rolled over a again. Typical action. But there was certainly nothing easy about playing it, was there?
The DWCPF / S-fund fell deeper into its bear flag after stalling near the top of the flag, and the 50-day EMA. Bear flags tend to break down so that 1100 area is key going forward.
The Nasdaq had been outperforming during this relief rally off the lows to the point where it is still trading above its 50-day EMA and the rising support line, even after yesterday's 3.5% loss. It filled a small open gap with yesterday's losses and with a couple of good earnings reports from Nasdaq companies, it will look to continue to lead by not breaking down like the other indices.
The EFA / I-fund and the Dow Transportation Index are now both trading below their bear flags after stalling at the 50-day EMA, and this is obviously a bad indication for the two.
The VIX was up again on Thursday but even though the indices closed near the lows of the day, the VIX did come off the day's highs to give back about half of Thursday's intraday gains. Still, it's above 40 and above the resistance line so this is a bearish scenario for stocks for now.
The BND / F-fund was up yesterday and remains quite buoyant. It seems like the bond market has been bracing for another push lower in yields and a push down in stocks, well before the stock market showed ay indications.
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.
