Stocks battled back from a nasty overnight futures trading session and early morning weakness, to close in positive territory as the bears could not hold on to post a third straight negative day. The Dow was up slightly while the Nasdaq led as the recent selling in large cap tech stocks brought in some dip buyers on Monday. The dollar, oil, and bonds were up on the day.
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Some of the market jitters lately have been a result of trade concerns with China after talk of possible retaliation against China for the way they handled the origins of the coronavirus. The fact that investors fought back to take the indices into the green tells us that they may not be all that concerned about it yet, but it may be something to keep an eye on.
The market has been through a lot over the last two plus months and it initially priced in the worst case scenario, and more recently it seems to have nearly priced in a full recovery from the virus. Things are getting a little better COVID-wise, but the economy is just now assessing the damage so there could still be a push / pull between hope and reality, rear-view mirror reports and permanent damage economic data, etc. For example, how long will it take an industry like the airlines to go back to normal profits, or before we see full sports arenas or casinos again? Even Warren Buffett, the ultimate long-term investor, sold all of his airline stocks recently.
The Fed has been a major factor making it tough for the "don't fight the Fed" investors to do anything but buy, despite what we're seeing in the economy, and with the S&P 500 trading right around where it was in April when the Fed made that announcement to buy $2 trillion in debt, we may be nearing an interesting pivot point. Will the Fed take the bulls over the finish line, or is the economy too beaten down to move the market any higher?
I wanted to follow up on the Nasdaq analysis that we talked about on Monday. Tuesday's 1.2% rebound was a nice recovery after Friday's 3.2% sell-off, but technically it is still below that breakdown area that we showed yesterday. We saw in April that a breakout above the descending resistance line can be followed by a pullback to that resistance line again, and so a relief rally back up to the old support line (which could fill that small open gap) wouldn't be anything more than a technical move. A rally above 9000 might be different, however.
The price of oil was up over 3% yesterday and that's a significant move, percentage-wise, off the lows. It's gone from $10 to $21 in 3 or 4 days, but there is still a lot of resistance in this area. Not that the stock market seems too focused on it recently, but it is a good gauge for how the economy may be faring. This is the time of year that demand is usually rising for summer road trips, but this year will certainly be different.
Earnings are coming in this week again and so far 114 companies on the S&P 500 have suspended giving guidance, which makes it very tough for analysts and investors to put prices on their stocks.
The Jobs report comes out on Friday and the estimates are a little frightening. They are expecting a loss of 21 million jobs, and an unemployment rate over 16%. Incredible. Lives were saved, but the economy is now on life support.
The S&P 500 (C-fund) fell below the 50-day EMA to start the trading day on Monday, but after it found support at the 20-day EMA, it managed to climb back above the 50-day again. That 20-day EMA has been surprising resilient and meaningful in this bear market. It held rather firmly as resistance for several days in April before it was eventually broken, and now there have been two success tests of it as support since the S&P has been above it.
The DWCPF / S-fund also managed to crawl back above the 50-day EMA with the help of Monday's afternoon rally. It led the TSP funds on the upside with a strong 0.66% gain. After stalling at the top of the trading channel, it successfully tested the lower end yesterday. That's impressive, but the chart still looks a little vulnerable being near that 50-day EMA and having a bear flag angle to it.
The EFA / I-fund was held back by a decent rally in the dollar on Monday. It is still trading below that trading channel and the 50-day EMA so we have some red flags here.
The Dow Transportation Index was hit the hardest yesterday with the airlines selling off on Buffett's comments. Like the EFA above, it is below the 50-day EMA and has now broken its rising trading channel.
The High Yield Corporate Bonds was down slightly yesterday and that's now two closes back below the 50-day EMA after that big rally in April failed at the 200-day EMA when the Fed said they may start buying High Yield Debt, but they haven't yet.
The BND / F-fund chart still looks like it is barely moving but that is only because of the crazy wide swings that it was trading in back in March and early April. The gain yesterday was respectable, but it just kept it within that tight range that it has been in since mid-April.
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. Well 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]
Some of the market jitters lately have been a result of trade concerns with China after talk of possible retaliation against China for the way they handled the origins of the coronavirus. The fact that investors fought back to take the indices into the green tells us that they may not be all that concerned about it yet, but it may be something to keep an eye on.
The market has been through a lot over the last two plus months and it initially priced in the worst case scenario, and more recently it seems to have nearly priced in a full recovery from the virus. Things are getting a little better COVID-wise, but the economy is just now assessing the damage so there could still be a push / pull between hope and reality, rear-view mirror reports and permanent damage economic data, etc. For example, how long will it take an industry like the airlines to go back to normal profits, or before we see full sports arenas or casinos again? Even Warren Buffett, the ultimate long-term investor, sold all of his airline stocks recently.
The Fed has been a major factor making it tough for the "don't fight the Fed" investors to do anything but buy, despite what we're seeing in the economy, and with the S&P 500 trading right around where it was in April when the Fed made that announcement to buy $2 trillion in debt, we may be nearing an interesting pivot point. Will the Fed take the bulls over the finish line, or is the economy too beaten down to move the market any higher?
I wanted to follow up on the Nasdaq analysis that we talked about on Monday. Tuesday's 1.2% rebound was a nice recovery after Friday's 3.2% sell-off, but technically it is still below that breakdown area that we showed yesterday. We saw in April that a breakout above the descending resistance line can be followed by a pullback to that resistance line again, and so a relief rally back up to the old support line (which could fill that small open gap) wouldn't be anything more than a technical move. A rally above 9000 might be different, however.
The price of oil was up over 3% yesterday and that's a significant move, percentage-wise, off the lows. It's gone from $10 to $21 in 3 or 4 days, but there is still a lot of resistance in this area. Not that the stock market seems too focused on it recently, but it is a good gauge for how the economy may be faring. This is the time of year that demand is usually rising for summer road trips, but this year will certainly be different.
Earnings are coming in this week again and so far 114 companies on the S&P 500 have suspended giving guidance, which makes it very tough for analysts and investors to put prices on their stocks.
The Jobs report comes out on Friday and the estimates are a little frightening. They are expecting a loss of 21 million jobs, and an unemployment rate over 16%. Incredible. Lives were saved, but the economy is now on life support.
The S&P 500 (C-fund) fell below the 50-day EMA to start the trading day on Monday, but after it found support at the 20-day EMA, it managed to climb back above the 50-day again. That 20-day EMA has been surprising resilient and meaningful in this bear market. It held rather firmly as resistance for several days in April before it was eventually broken, and now there have been two success tests of it as support since the S&P has been above it.
The DWCPF / S-fund also managed to crawl back above the 50-day EMA with the help of Monday's afternoon rally. It led the TSP funds on the upside with a strong 0.66% gain. After stalling at the top of the trading channel, it successfully tested the lower end yesterday. That's impressive, but the chart still looks a little vulnerable being near that 50-day EMA and having a bear flag angle to it.
The EFA / I-fund was held back by a decent rally in the dollar on Monday. It is still trading below that trading channel and the 50-day EMA so we have some red flags here.
The Dow Transportation Index was hit the hardest yesterday with the airlines selling off on Buffett's comments. Like the EFA above, it is below the 50-day EMA and has now broken its rising trading channel.
The High Yield Corporate Bonds was down slightly yesterday and that's now two closes back below the 50-day EMA after that big rally in April failed at the 200-day EMA when the Fed said they may start buying High Yield Debt, but they haven't yet.
The BND / F-fund chart still looks like it is barely moving but that is only because of the crazy wide swings that it was trading in back in March and early April. The gain yesterday was respectable, but it just kept it within that tight range that it has been in since mid-April.
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. Well 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.
