Stocks rallied yesterday erasing the losses from Wednesday. Two down days in a row have become rare, and it has actually been more than two months since we've seen three down days in a row for the S&P500. The Dow gained 211-points and we saw healthy gains across the board, although for a third straight day the indices closed well off their intraday highs with some late selling.
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The jobs report that everyone has been anticipating will be here today and I think there are few who don't know what's coming. That's what makes the rally yesterday that much more interesting. Getting a "sell the rumor, buy the news" reaction would have been more of a believable story, and perhaps some savvy investors are trying to front run that theory by buying first.
The street is expecting a loss of 21 million jobs for the month of April, and an unemployment rate over 16%. Now what kind of number could we possibly get that would surprise the market? Could estimates be off by millions? Hundreds of thousands? Just tens of thousands? What would matter?
It reminds me of an old poker story, or any gambling activity, where if someone asked you how you felt after losing $200 in a poker game, you'd probably say - not so good. How about losing $2200? You'd feel terrible. What would be the difference in how you felt between losing $2200 and $2400? Probably no difference, right?
During a "normal" month the difference between gaining 150,000 and 250,000 jobs is a pretty big deal. But what's the difference if we lost 21 million jobs of 22 million jobs? To those extra million people who lost their jobs it would be a big deal, but the market probably wouldn't feel any differently between the two.
So stocks are doing their thing and it's probably more because of investor skepticism than anything. But the bulls may be starting to get a little more confident with the Nasdaq moving positive for the year - who'd a thunk it - and just as the downside was so brutal for the bulls, the rebound has been so for the bears.
Bond prices were up big yesterday after a few days of being down, and the aggregate bond ETF's are still near all time highs. The yield on the 10-year Treasury is still at 0.63%. And why is gold near all time highs? These are supposed to be safety trades that investors turn to when there's signs of trouble. Not always, but in general.
The 10-year yields looks to be on the verge of another leg lower ...
And gold on the verge of another breakout to new highs.
Something doesn't seem right, except when you view it from the perspective that the Fed is buying bonds at a crazy rate, and the stimulus they are throwing out there is a concern for inflation. There wouldn't, or shouldn't be anything like that happening if the economy was healthy.
So stocks are rising on stimulus. The Fed and the government are throwing trillions around like candy and seeing what sticks. Is that a reason to join the bullish bandwagon? Maybe. Can you be comfortable doing that? I doubt it. Hence the skepticism which is a good part of the fuel for the rally. Confused yet?
The S&P 500 (C-fund) rallied up early, closed with a strong 1.15% gain, but it did close off the highs of the day after nearing some of those pesky resistance line on the chart. The 50 and 20 day EMA continue to hold firmly as support but so far no jump off of them. Perhaps the jobs report will do that? It will be such a big number that it could ramp the index above the 200-day EMA, or drop it below the 50 day EMA on the news. I don't know for sure, but it seems like it could be a game changer for a market that has been moving sideways for several weeks.
A closer look shows some bear flags, most of which defied normal technical analysis and broke to the upside. It's in one right now.
The Russell 2000 small caps index has been doing quite well recently but it is lagging overall in the longer term. It never did breakout from the 2018 highs like the S&P 500 did, and the recent high came right at an interesting level where the prior low met the top of the large open gap. This isn't a healthy looking chart. The question is, does that mean it has a lot of room to run while it catches up, or is it signaling to those other indices that things aren't as good as they think they are.
The Dow Transportation Index has a small bear flag on it and that red flag may be forming within a bearish looking head and shoulders pattern, which is all below the 50-day EMA. A move above 8750 would remedy that, but that's a long way away.
The price of oil has been stalling at the 50-day EMA after its historic percentage gains recently. A couple of back to back negative reversal days sets up some trouble for this chart, but it could just be looking to fill that red open gap below.
The BND / F-fund bounced off the bottom of its bull flag that we have been watching. Bull flags tend to break to the upside but with yields already so low, can this actually breakout to the upside? I think if it does, it may send a shock wave through the stock market.
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. Have a great weekend!
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]
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The jobs report that everyone has been anticipating will be here today and I think there are few who don't know what's coming. That's what makes the rally yesterday that much more interesting. Getting a "sell the rumor, buy the news" reaction would have been more of a believable story, and perhaps some savvy investors are trying to front run that theory by buying first.
The street is expecting a loss of 21 million jobs for the month of April, and an unemployment rate over 16%. Now what kind of number could we possibly get that would surprise the market? Could estimates be off by millions? Hundreds of thousands? Just tens of thousands? What would matter?
It reminds me of an old poker story, or any gambling activity, where if someone asked you how you felt after losing $200 in a poker game, you'd probably say - not so good. How about losing $2200? You'd feel terrible. What would be the difference in how you felt between losing $2200 and $2400? Probably no difference, right?
During a "normal" month the difference between gaining 150,000 and 250,000 jobs is a pretty big deal. But what's the difference if we lost 21 million jobs of 22 million jobs? To those extra million people who lost their jobs it would be a big deal, but the market probably wouldn't feel any differently between the two.
So stocks are doing their thing and it's probably more because of investor skepticism than anything. But the bulls may be starting to get a little more confident with the Nasdaq moving positive for the year - who'd a thunk it - and just as the downside was so brutal for the bulls, the rebound has been so for the bears.
Bond prices were up big yesterday after a few days of being down, and the aggregate bond ETF's are still near all time highs. The yield on the 10-year Treasury is still at 0.63%. And why is gold near all time highs? These are supposed to be safety trades that investors turn to when there's signs of trouble. Not always, but in general.
The 10-year yields looks to be on the verge of another leg lower ...
And gold on the verge of another breakout to new highs.
Something doesn't seem right, except when you view it from the perspective that the Fed is buying bonds at a crazy rate, and the stimulus they are throwing out there is a concern for inflation. There wouldn't, or shouldn't be anything like that happening if the economy was healthy.
So stocks are rising on stimulus. The Fed and the government are throwing trillions around like candy and seeing what sticks. Is that a reason to join the bullish bandwagon? Maybe. Can you be comfortable doing that? I doubt it. Hence the skepticism which is a good part of the fuel for the rally. Confused yet?
The S&P 500 (C-fund) rallied up early, closed with a strong 1.15% gain, but it did close off the highs of the day after nearing some of those pesky resistance line on the chart. The 50 and 20 day EMA continue to hold firmly as support but so far no jump off of them. Perhaps the jobs report will do that? It will be such a big number that it could ramp the index above the 200-day EMA, or drop it below the 50 day EMA on the news. I don't know for sure, but it seems like it could be a game changer for a market that has been moving sideways for several weeks.
A closer look shows some bear flags, most of which defied normal technical analysis and broke to the upside. It's in one right now.
The Russell 2000 small caps index has been doing quite well recently but it is lagging overall in the longer term. It never did breakout from the 2018 highs like the S&P 500 did, and the recent high came right at an interesting level where the prior low met the top of the large open gap. This isn't a healthy looking chart. The question is, does that mean it has a lot of room to run while it catches up, or is it signaling to those other indices that things aren't as good as they think they are.
The Dow Transportation Index has a small bear flag on it and that red flag may be forming within a bearish looking head and shoulders pattern, which is all below the 50-day EMA. A move above 8750 would remedy that, but that's a long way away.
The price of oil has been stalling at the 50-day EMA after its historic percentage gains recently. A couple of back to back negative reversal days sets up some trouble for this chart, but it could just be looking to fill that red open gap below.
The BND / F-fund bounced off the bottom of its bull flag that we have been watching. Bull flags tend to break to the upside but with yields already so low, can this actually breakout to the upside? I think if it does, it may send a shock wave through the stock market.
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. Have a great weekend!
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.
