Another day, another rally as stocks continue their climb off of the March lows. The Dow tacked on 359 more points and there were few weaknesses out there, unless you include the price of oil, which was crushed again, yet stocks ignored it. Is it just momentum, or can the stock market continue to climb with the obvious signs of economic destruction?
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The stock market has spent the last month healing its wounds from the devastating one month 35% decline from the February 23 high to the March 23 low. But the bounce back has been anything but typical, if you've lived through a few bear markets like I have. We've seen 58% of those losses recovered with this 31% rally off the lows in the S&P 500. -- Just a mathematical reminder since I get asked about this often -- gaining 30% after a 30% loss does not get you even. The S&P will have to move 48% off the lows to get back that 35% loss.
The incredible amount of stimulus given to the economy and the market may just be overruling anything that resembles normal market activity. The question is, does that mean we buy stocks because of that? Honestly, who knows? Some of the smartest market minds I know are confused by this, and it's not like we've seen anything like this before to know how it might play out.
I honestly get tired of hearing myself say these things. It's just starting to sound stupid. But what's the alternative? Do we throw caution to the wind regardless of everything we have learned in our lifetimes, and buy stocks that are going up because of the monetary printing presses? Maybe so. That seems to be what the market is trying to tell us to do.
The price of oil fell 25% yesterday, just astonishing movements in oil lately. It was the second lowest close in the 40 year chart that I had available. It's a snap shot of what's happened to the economy.
How about those other economically sensitive commodities like lumber and copper?
Lumber rallied off its lows, hit the 50-day EMA earlier this month and rolled over again, while copper has also rebounded and is now touching its 50-day EMA.
The stock market seems to have gotten ahead of these, so which will pull which?
The S&P 500 (C-fund) closed above the 50-day EMA for a second straight day, and that's a bullish sign although I have the 3 to 5 day rule. As we mentioned yesterday there is another round of resistance even now that it has moved above the 50-day EMA. The 200-day EMA is about 72 point overhead, there's an open gap that will get filled after another 22-points, and other rising resistance lines, but they are rising so they are not firm.
The DWCPF / S-fund has put together several good days in a row, and yesterday's nearly 4% gain pushed it above its 50-day EMA. It also broke above the bull flag that we have been watching, but I've also been skeptical of that happening because of that 50-day EMA. All this while oil prices are at historic lows. How? Oil industry bailouts, I assume?
The Dow Transportation Index had broken down from its bearish looking flag formation and yesterday it rallied back up to the bottom of that flag, where it is meeting the 50-day EMA. I would say that this should be a struggle, but this isn't your grandmother's bear market. This is the market that has been given a credit card with an unlimited line of credit from the Fed.
The EFA / I-fund has been consolidating sideways for a while and could be the next breakout if it's going to follow the path of the U.S. stocks.
I don't know if it's worth watching anymore, but China's Shanghai Index is backing off from its 50-day EMA and also broke below its bear flag.
The BND / F-fund was down yesterday as yields moved higher. That old closing high just below 88 has been holding firm. There is also an open gap below 87 that may have to get filled before it makes new highs, but it may depend on the volatility in the stock market over the next week or so.
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="align: center"]Daily TSP Funds Return
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[/TR]
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[TD][/TD]
[TD="align: center"]
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The stock market has spent the last month healing its wounds from the devastating one month 35% decline from the February 23 high to the March 23 low. But the bounce back has been anything but typical, if you've lived through a few bear markets like I have. We've seen 58% of those losses recovered with this 31% rally off the lows in the S&P 500. -- Just a mathematical reminder since I get asked about this often -- gaining 30% after a 30% loss does not get you even. The S&P will have to move 48% off the lows to get back that 35% loss.
The incredible amount of stimulus given to the economy and the market may just be overruling anything that resembles normal market activity. The question is, does that mean we buy stocks because of that? Honestly, who knows? Some of the smartest market minds I know are confused by this, and it's not like we've seen anything like this before to know how it might play out.
I honestly get tired of hearing myself say these things. It's just starting to sound stupid. But what's the alternative? Do we throw caution to the wind regardless of everything we have learned in our lifetimes, and buy stocks that are going up because of the monetary printing presses? Maybe so. That seems to be what the market is trying to tell us to do.
The price of oil fell 25% yesterday, just astonishing movements in oil lately. It was the second lowest close in the 40 year chart that I had available. It's a snap shot of what's happened to the economy.
How about those other economically sensitive commodities like lumber and copper?
Lumber rallied off its lows, hit the 50-day EMA earlier this month and rolled over again, while copper has also rebounded and is now touching its 50-day EMA.
The stock market seems to have gotten ahead of these, so which will pull which?
The S&P 500 (C-fund) closed above the 50-day EMA for a second straight day, and that's a bullish sign although I have the 3 to 5 day rule. As we mentioned yesterday there is another round of resistance even now that it has moved above the 50-day EMA. The 200-day EMA is about 72 point overhead, there's an open gap that will get filled after another 22-points, and other rising resistance lines, but they are rising so they are not firm.
The DWCPF / S-fund has put together several good days in a row, and yesterday's nearly 4% gain pushed it above its 50-day EMA. It also broke above the bull flag that we have been watching, but I've also been skeptical of that happening because of that 50-day EMA. All this while oil prices are at historic lows. How? Oil industry bailouts, I assume?
The Dow Transportation Index had broken down from its bearish looking flag formation and yesterday it rallied back up to the bottom of that flag, where it is meeting the 50-day EMA. I would say that this should be a struggle, but this isn't your grandmother's bear market. This is the market that has been given a credit card with an unlimited line of credit from the Fed.
The EFA / I-fund has been consolidating sideways for a while and could be the next breakout if it's going to follow the path of the U.S. stocks.
I don't know if it's worth watching anymore, but China's Shanghai Index is backing off from its 50-day EMA and also broke below its bear flag.
The BND / F-fund was down yesterday as yields moved higher. That old closing high just below 88 has been holding firm. There is also an open gap below 87 that may have to get filled before it makes new highs, but it may depend on the volatility in the stock market over the next week or so.
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.
