As unusual as they are, we're getting used to these mixed days. If we look at the Dow, S&P 500, and Nasdaq, it looks like stocks were up solidly across the board, but instead small caps took a hit, so which stock fund to be in continues to be as important as whether or not to be in stocks at all.
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For the first time in a while we got a better than expected jobs report. The May report topped estimates by about 150,000 jobs, which is a monster beat, although the unemployment rate did move up to 5.9%. In early May we got the April jobs report and it was a big miss. Stocks rallied. In early June we got the May report. Another miss. Stocks rallied. Now we get a nice healthy report that beat estimates and... stocks rallied.
The problem with the prior rallies is that they didn't really follow through the following week. Three Friday rallies but In May stocks tumbled right after the weekend, and in June the rally stalled the following Monday but didn't pull back for another week or so. Now we have a beat instead of a miss, so will it be different this time?
The yield on the 10-year Treasury fell again on Friday closing at 1.426%, which is its lowest reading since early March. Looking at a longer term chart we can see the 200-day EMA is just above 1.3%, and an open gap near 1.2%. Are these the targets? Why would yields be falling in an environment where the economy is growing at an astonishing 7%? As we've mentioned before, the Fed buying bonds may have a lot to do with it, but something doesn't seem right.
The Equal Weighted S&P 500 ETF (same 500 stocks as the S&P 500 just weighted differently) did make a new closing high on Friday, but it is well behind the big rallies we are seeing the S&P 500 Index itself. This looks like an interesting juncture where it can either confirm the breakout to new highs in the S&P index by breaking out as well this week, but if it finds resistance here, it could be very telling for the broader market.
The action is certain bullish but again we are seeing signs that something may not be right - both on the charts like above, and the indicators which are showing negative divergences.
The S&P 500 (C-fund) kept its winning steak alive making it 7 straight positive closes. No matter how you slice it, this chart looks extended, but that doesn't mean it has to reverse back down, However, as we mentioned above, sometimes after a news / data driven rally like Friday's jobs report, keeping the upside momentum going can be a challenge. Even a modest move down to just 4275 would be a healthy test of the prior breakout line.
The weekly chart makes it even more obvious how extended this is, and a push down to 3500, where the support and resistance lines meet, could be possible, but certainly no guarantee.
The DWCPF (S-fund) pulled back on Friday but it found support at the breakout line again, and that appears to be the test here.
The Transportation Index (not shown) was down on Friday and it did pull back after hitting its 50-day EMA.
The EFA (I-fund) rallied as the dollar was down. It filled that open gap from earlier in the week, so it could be up against some resistance. It did close back above its 50-day EMA for a second straight day, which is a good sign.
The VIX fell again as it hangs around that 15 - 16 area, which has become quite sticky.
BND (bonds / F-fund) rallied on the back on the jobs report, as yields fell, and now it is finally in that open gap from back in February. The question is whether the top of that gap will hold as resistance, as is often the case.
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
To get weekly or daily notifications when we post new commentary, sign up HERE.
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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For the first time in a while we got a better than expected jobs report. The May report topped estimates by about 150,000 jobs, which is a monster beat, although the unemployment rate did move up to 5.9%. In early May we got the April jobs report and it was a big miss. Stocks rallied. In early June we got the May report. Another miss. Stocks rallied. Now we get a nice healthy report that beat estimates and... stocks rallied.
The problem with the prior rallies is that they didn't really follow through the following week. Three Friday rallies but In May stocks tumbled right after the weekend, and in June the rally stalled the following Monday but didn't pull back for another week or so. Now we have a beat instead of a miss, so will it be different this time?
The yield on the 10-year Treasury fell again on Friday closing at 1.426%, which is its lowest reading since early March. Looking at a longer term chart we can see the 200-day EMA is just above 1.3%, and an open gap near 1.2%. Are these the targets? Why would yields be falling in an environment where the economy is growing at an astonishing 7%? As we've mentioned before, the Fed buying bonds may have a lot to do with it, but something doesn't seem right.
The Equal Weighted S&P 500 ETF (same 500 stocks as the S&P 500 just weighted differently) did make a new closing high on Friday, but it is well behind the big rallies we are seeing the S&P 500 Index itself. This looks like an interesting juncture where it can either confirm the breakout to new highs in the S&P index by breaking out as well this week, but if it finds resistance here, it could be very telling for the broader market.
The action is certain bullish but again we are seeing signs that something may not be right - both on the charts like above, and the indicators which are showing negative divergences.
The S&P 500 (C-fund) kept its winning steak alive making it 7 straight positive closes. No matter how you slice it, this chart looks extended, but that doesn't mean it has to reverse back down, However, as we mentioned above, sometimes after a news / data driven rally like Friday's jobs report, keeping the upside momentum going can be a challenge. Even a modest move down to just 4275 would be a healthy test of the prior breakout line.
The weekly chart makes it even more obvious how extended this is, and a push down to 3500, where the support and resistance lines meet, could be possible, but certainly no guarantee.
The DWCPF (S-fund) pulled back on Friday but it found support at the breakout line again, and that appears to be the test here.
The Transportation Index (not shown) was down on Friday and it did pull back after hitting its 50-day EMA.
The EFA (I-fund) rallied as the dollar was down. It filled that open gap from earlier in the week, so it could be up against some resistance. It did close back above its 50-day EMA for a second straight day, which is a good sign.
The VIX fell again as it hangs around that 15 - 16 area, which has become quite sticky.
BND (bonds / F-fund) rallied on the back on the jobs report, as yields fell, and now it is finally in that open gap from back in February. The question is whether the top of that gap will hold as resistance, as is often the case.
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
To get weekly or daily notifications when we post new commentary, sign up HERE.
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.
