If you just saw the closing prices yesterday it probably looked like a good day for stocks. Yes, the indices were positive but we had another reversal day and, as you can see in the three small index charts below, the highs came shortly after the opening bell. The Dow hung onto a 72-point gain which was about 300-points off the morning high. The negative drag doesn't look good on a chart, but it did serve a purpose as we'll check out below. Bonds were up on a decline in yields. The dollar was down sharply helping the I-fund lead the way yesterday.
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It's always tough to trust a Monday morning gap opening, which is what we got yesterday as the S&P 500 gapped up to its intraday high with a more than 1% gain within minutes of the opening bell. That rally faded but by the close the modest gain was obviously better than a loss for the bulls.
The S&P 500 chart was pushing back above the 50 and 200-day EMAs in early trading and failed to hold by the close, although technically it held above the support it had coming into the day. The 200-day Simple Average (orange line) was tested at Friday's lows and bounced back, and the follow through to the upside yesterday wasn't super impressive, but it served a purpose. Not only did it produce a modest gain on the day, it made a higher high and higher low over Friday's action, and it kept the chart within the sideways consolidation that we have been noting for a few days now. That could be churning out a turning point like the others shown below.
I'm tentatively optimistic that this can hold and we'll see some kind of push up toward the prior highs, but I'm not looking past that at the moment. We all know about the issues that the market currently has -- the very hawkish Fed being number one. So while stocks may rebound, they don't necessarily have to move up to new highs. If we start to see that support near 3950 fail, then I could quickly change my tune.
Yields were down yesterday and the 10-year yield chart also has a sideways consolidation pattern forming, and only one (blue) of the last 6 similar choppy patterns didn't change the direction of the trend coming out of that consolidation. The reason that is important is that stocks have been moving counter to this yield so a move lower here would be vital to the stock market.
The dollar was down sharply yesterday, tumbling back below the 200-day average, and that helped the EFA (I-fund) break back above its 50-day EMA. This was a second failed breakout above the 200-day for the dollar. Is this setting up for a repeat decline?
With both stocks and bonds down in February, there shouldn't be any major end of month rebalancing effect today like we often see when one market does much better than the other. For the bulls, they are hoping for a "new month, new direction" phenomenon in the coming days, while the bears are starting to feel more confidence that the 2023 rally is done.
The long-term monthly chart of the S&P 500 (C-fund) tested the 50-month moving average near the lows of the 2022 bear market and held. Since 2009 there were only two monthly exceptions - March of 2020 and September of last year. It has spent the last 5 months back above that average but now we have either a "V" bottom for the bulls, or possibly a large bear flag for the bears.
The DWCPF (S-fund) ran back up to its 20-day EMA and failed, but it remains above the 50 and 200 averages, which is more meaningful, and remains in that bullish flag. Sub-1700 would change everything. Otherwise it may be a matter of patience here.
The EFA (I-fund) chart was posted in the top section.
BND (bonds / F-fund) was up with yields down yesterday. The horizontal support line could turn out to be the neckline of a head and shoulders pattern, which could mean a short-term bounce if a right shoulder starts to form.
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 so much 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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It's always tough to trust a Monday morning gap opening, which is what we got yesterday as the S&P 500 gapped up to its intraday high with a more than 1% gain within minutes of the opening bell. That rally faded but by the close the modest gain was obviously better than a loss for the bulls.
The S&P 500 chart was pushing back above the 50 and 200-day EMAs in early trading and failed to hold by the close, although technically it held above the support it had coming into the day. The 200-day Simple Average (orange line) was tested at Friday's lows and bounced back, and the follow through to the upside yesterday wasn't super impressive, but it served a purpose. Not only did it produce a modest gain on the day, it made a higher high and higher low over Friday's action, and it kept the chart within the sideways consolidation that we have been noting for a few days now. That could be churning out a turning point like the others shown below.
I'm tentatively optimistic that this can hold and we'll see some kind of push up toward the prior highs, but I'm not looking past that at the moment. We all know about the issues that the market currently has -- the very hawkish Fed being number one. So while stocks may rebound, they don't necessarily have to move up to new highs. If we start to see that support near 3950 fail, then I could quickly change my tune.
Yields were down yesterday and the 10-year yield chart also has a sideways consolidation pattern forming, and only one (blue) of the last 6 similar choppy patterns didn't change the direction of the trend coming out of that consolidation. The reason that is important is that stocks have been moving counter to this yield so a move lower here would be vital to the stock market.
The dollar was down sharply yesterday, tumbling back below the 200-day average, and that helped the EFA (I-fund) break back above its 50-day EMA. This was a second failed breakout above the 200-day for the dollar. Is this setting up for a repeat decline?
With both stocks and bonds down in February, there shouldn't be any major end of month rebalancing effect today like we often see when one market does much better than the other. For the bulls, they are hoping for a "new month, new direction" phenomenon in the coming days, while the bears are starting to feel more confidence that the 2023 rally is done.
The long-term monthly chart of the S&P 500 (C-fund) tested the 50-month moving average near the lows of the 2022 bear market and held. Since 2009 there were only two monthly exceptions - March of 2020 and September of last year. It has spent the last 5 months back above that average but now we have either a "V" bottom for the bulls, or possibly a large bear flag for the bears.
The DWCPF (S-fund) ran back up to its 20-day EMA and failed, but it remains above the 50 and 200 averages, which is more meaningful, and remains in that bullish flag. Sub-1700 would change everything. Otherwise it may be a matter of patience here.
The EFA (I-fund) chart was posted in the top section.
BND (bonds / F-fund) was up with yields down yesterday. The horizontal support line could turn out to be the neckline of a head and shoulders pattern, which could mean a short-term bounce if a right shoulder starts to form.
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 so much 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.
