Stocks rallied out of the gate on Monday, continuing the bounce off the recent lows. Trading volume was very light, perhaps because of the pre-holiday week, as it was lowest volume day on the S&P 500 other than a couple of earlier Fridays. That doesn't take away anything from the gains, which were real, but perhaps money managers weren't the most active traders. The Dow gained 186-points and it was actually the percentage laggard on the day with its 0.54% gain, while the big tech stocks of the Nasdaq led the way.
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We're saw the S&P 500 come within 1% of its all times highs, but as we talked about yesterday, some indices like the Nasdaq and small caps, are still well off their highs so it's still a question of which will follow which? Do they go their own ways, will the S&P 500 pull up the laggards, or will tech and small caps be a drag on the large caps of the S&P and Dow?
I know I'm looking at the glass as half empty, but if everything was great all the time, stocks would go up every day. Take a look at the Russell 2000 small caps index again. The good news is, it closed above the 50-day EMA for the first time in two weeks. The bad news is, while no chart patterns are foolproof, those are clear bear flag and head and shoulders patterns, and neither of them tend to resolve themselves to the upside.
The Nasdaq 100 Index, which are the large cap tech stocks, led on Monday with a 1.7% gain, and by comparison, the RSP, which is the S&P 500 Equal Weight Index, was up "just" 0.58%, so the broader market was OK, but that's a possible bear flag as well.
The average stock didn't explode like the large tech stocks did yesterday, and they have had a habit of disappointing investors after a big gain in recent months. The chart is improving with its close back above the 50-day EMA, but it still has some work to do.
Bottom line, Monday's action was good and perhaps the lows are in, but we do have a few charts that may need to improve before we can call the pullback over.
The S&P 500 (C-fund) reached closer to the prior highs. It broke above 4200 briefly before some late selling and that seems to be an area it has been struggling to hold. The 50-day EMA has been very solid support for months and twice in May it was an important turning point, but the red rising channel was also broken in May so we'll have to see if that has any meaning. Breakdowns tend to be warning signs, but not always downright reasons to sell. This bounce back up to the bottom of the channel and the prior highs will be another test.
The DWCPF (S-fund) continue to push the limits of the bearish case as the top of that bear flag was tested again. It did close above the 50-day EMA for the first time two plus weeks, but that breakout failed the next trading day (May 10) so we'll see what happens today.
The EFA / I-fund continues its climb to the prior highs and I know I sound like a broken record, much of that has to do with the extreme weakness in the dollar. If the dollar gives us any kind of relief rally we could see this back testing the 50-day EMA. But until then, it is performing well.
The Dow Transportation Index rallied with the rest of the market yesterday but it remains below the old support line, which could now act as resistance. There are several charts that are at or near important pivot points so the next few days will be very interesting and hopefully, telling.
The price of oil has rallied big over the last two trading days. Oil and the yield on the 10-year tend to have a close directional correlation - not so much in the size of the move. Higher oil prices can mean economic growth, but so does rising bond yields. The fact that oil has move sharply higher in recent days while the yield on the 10-year has been dipping is interesting, and curious.
BND (F-fund) broke to the upside of a bear flag and above the 50-day EMA on no major news that I can see. So the bond market continues to be a strange one to try to figure out. Is this a pre-holiday reversal from the trend?
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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We're saw the S&P 500 come within 1% of its all times highs, but as we talked about yesterday, some indices like the Nasdaq and small caps, are still well off their highs so it's still a question of which will follow which? Do they go their own ways, will the S&P 500 pull up the laggards, or will tech and small caps be a drag on the large caps of the S&P and Dow?
I know I'm looking at the glass as half empty, but if everything was great all the time, stocks would go up every day. Take a look at the Russell 2000 small caps index again. The good news is, it closed above the 50-day EMA for the first time in two weeks. The bad news is, while no chart patterns are foolproof, those are clear bear flag and head and shoulders patterns, and neither of them tend to resolve themselves to the upside.
The Nasdaq 100 Index, which are the large cap tech stocks, led on Monday with a 1.7% gain, and by comparison, the RSP, which is the S&P 500 Equal Weight Index, was up "just" 0.58%, so the broader market was OK, but that's a possible bear flag as well.
The average stock didn't explode like the large tech stocks did yesterday, and they have had a habit of disappointing investors after a big gain in recent months. The chart is improving with its close back above the 50-day EMA, but it still has some work to do.
Bottom line, Monday's action was good and perhaps the lows are in, but we do have a few charts that may need to improve before we can call the pullback over.
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Admin note:
I have had several requests over the years to create a service that will alert you when certain AutoTracker users are making a transaction (excluding premium members). It sounded like a good idea but logistically I wasn't sure how I could make it work. I would have had to automate something to generate emails when the IFT's were entered in the AutoTracker, and that could be a problem.
Between the forum and some premium service automated notifications (not IFT alerts), we send a lot of emails and unfortunately we've been tagged by some email services as potential spammers and some people have difficult time receiving these automated computer generated emails. If I didn't automate it, it would have to be done manually, and right about the time where I am watching the market and getting any IFT alerts ready for the premium services, so I just wouldn't have the time to put it together and deliver it in time for anyone to use the information to help make their decisions.
That's where TommyIV (Weekly Wrap Up) comes in. I recently spent some time with TommyIV and we may have come up with a possible way to do this. We're working on the logistics and may have come up with something. The email would not only include member IFTs for that day, but important headlines, economic data and more, all before the IFT deadline.
It would likely be sent via a third party email service like Constant Contact, similar to the way we send the IFT alerts now which are more successful at getting delivered.
It would not be a free service because of the time and effort it will take to put this information together and delivered each morning, but it will be a nominal, reasonable price.
I'll let you know when it is available and we'll likely do some kind of free trial period so you can check it out before deciding. We have a basic idea of what we want to do, but at this point I'd be open to suggestions on what you might like to see included:
Email us at
,
,or both.
I have had several requests over the years to create a service that will alert you when certain AutoTracker users are making a transaction (excluding premium members). It sounded like a good idea but logistically I wasn't sure how I could make it work. I would have had to automate something to generate emails when the IFT's were entered in the AutoTracker, and that could be a problem.
Between the forum and some premium service automated notifications (not IFT alerts), we send a lot of emails and unfortunately we've been tagged by some email services as potential spammers and some people have difficult time receiving these automated computer generated emails. If I didn't automate it, it would have to be done manually, and right about the time where I am watching the market and getting any IFT alerts ready for the premium services, so I just wouldn't have the time to put it together and deliver it in time for anyone to use the information to help make their decisions.
That's where TommyIV (Weekly Wrap Up) comes in. I recently spent some time with TommyIV and we may have come up with a possible way to do this. We're working on the logistics and may have come up with something. The email would not only include member IFTs for that day, but important headlines, economic data and more, all before the IFT deadline.
It would likely be sent via a third party email service like Constant Contact, similar to the way we send the IFT alerts now which are more successful at getting delivered.
It would not be a free service because of the time and effort it will take to put this information together and delivered each morning, but it will be a nominal, reasonable price.
I'll let you know when it is available and we'll likely do some kind of free trial period so you can check it out before deciding. We have a basic idea of what we want to do, but at this point I'd be open to suggestions on what you might like to see included:
Email us at
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[/TABLE]
The S&P 500 (C-fund) reached closer to the prior highs. It broke above 4200 briefly before some late selling and that seems to be an area it has been struggling to hold. The 50-day EMA has been very solid support for months and twice in May it was an important turning point, but the red rising channel was also broken in May so we'll have to see if that has any meaning. Breakdowns tend to be warning signs, but not always downright reasons to sell. This bounce back up to the bottom of the channel and the prior highs will be another test.
The DWCPF (S-fund) continue to push the limits of the bearish case as the top of that bear flag was tested again. It did close above the 50-day EMA for the first time two plus weeks, but that breakout failed the next trading day (May 10) so we'll see what happens today.
The EFA / I-fund continues its climb to the prior highs and I know I sound like a broken record, much of that has to do with the extreme weakness in the dollar. If the dollar gives us any kind of relief rally we could see this back testing the 50-day EMA. But until then, it is performing well.
The Dow Transportation Index rallied with the rest of the market yesterday but it remains below the old support line, which could now act as resistance. There are several charts that are at or near important pivot points so the next few days will be very interesting and hopefully, telling.
The price of oil has rallied big over the last two trading days. Oil and the yield on the 10-year tend to have a close directional correlation - not so much in the size of the move. Higher oil prices can mean economic growth, but so does rising bond yields. The fact that oil has move sharply higher in recent days while the yield on the 10-year has been dipping is interesting, and curious.
BND (F-fund) broke to the upside of a bear flag and above the 50-day EMA on no major news that I can see. So the bond market continues to be a strange one to try to figure out. Is this a pre-holiday reversal from the trend?
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.
