Stocks opened with relentless buying on Wednesday morning, and all of the major indices finished with modest to strong gains, but for a second day in a row we did see some selling into the close - normally considered the smart money. But we've seen a tremendous 4 or 5 day rally and a little profit taking is probably nothing to be concerned about, but it could be a tell of some short-term fatigue. The Dow ended the day up 39-points, with gains in the S&P 500 and Nasdaq of less than a quarter of a percent. Small and mid-cap stocks led on the upside, although the Russell 2000 gave up more than half of its early gains. Bonds were down, as yields rallied sharply. The dollar was down pushing oil, copper, and lumber prices higher on the day.
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We head into day one of the Jackson Hole Economic Symposium today and stocks have been roaring into it. Could this give the Fed some cover to start talking tapering of their easing program? Again, it's not an FOMC meeting but investors will hang on, and interpret, every word the Fed says.
I have been too defensive much of this year compared to what the market is trying to give us, but I look at long term monthly charts like this and have to cringe a bit. These may look worse than they actually are since they are not logarithmic charts, but yeah, I used them for effect. Look how far above their 50 and 200-month averages they are, although the speed of the rallies is also pulling up the moving averages very quickly as well.
The Yield on the 10-year Treasury blasted through the resistance and that was perhaps a sign of some economic strength, giving investors some confidence, but they won't want them running up too quickly.
The Financial stocks love to see yields move up as it helps their bottom line allowing them to raise their rates. But you can see this recent move higher hit a double top and they closed off their highs, Whether this triggers a meaningful pullback, I don't know, but a modest double top pullback is very possible. But this, and many other charts look very healthy - at least the ones that are not hitting the stratosphere like the ones up above.
Seasonality remains good this week, but the final days in August gets a little dicey.
Chart provided courtesy of www.sentimentrader.com
The S&P 500 (C-fund) makes a new high almost daily these days as it rides below the rising resistance of the trading channel. We've see sharp spikes higher, like the one we just had, several times this year and for the S&P 500, it has generally led to a slow and steady grind higher, or a little consolidation, but not much worse. Last year in early September the market saw a big thud that broke its bullish summer trend, so we'll be on the lookout for something similar.
The DWCPF (S-fund) led on the upside as it beat the S&P 500 large caps, and the Russell 2000 small cap indices, so it was the mid-caps that stole the show yesterday. It closed above the resistance line that we have noted for months, but there is some possible resistance at yesterday's high as we saw other July and August rallies stall there.
The EFA (EAFE Index / I-fund) was up slightly on a volatile day for the dollar so this index was a little choppy yesterday, and they gave the I-fund a loss on the day, perhaps some payback from Tuesday's big gain. There are open gaps above and below that can get filled at any time, but the overall look is a bullish chart for now.
The Dow Transportation Index closed back above the 50-day EMA but it is once again testing the longer term descending resistance line.
The BND (bonds / F-fund) fell sharply as the yield on the 10-year made a big move higher. It looks like the 50-day average will be tested again and obviously that needs to hold or we could see it come down to test the 200-day EMA and lower support line.
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 head into day one of the Jackson Hole Economic Symposium today and stocks have been roaring into it. Could this give the Fed some cover to start talking tapering of their easing program? Again, it's not an FOMC meeting but investors will hang on, and interpret, every word the Fed says.
I have been too defensive much of this year compared to what the market is trying to give us, but I look at long term monthly charts like this and have to cringe a bit. These may look worse than they actually are since they are not logarithmic charts, but yeah, I used them for effect. Look how far above their 50 and 200-month averages they are, although the speed of the rallies is also pulling up the moving averages very quickly as well.
The Yield on the 10-year Treasury blasted through the resistance and that was perhaps a sign of some economic strength, giving investors some confidence, but they won't want them running up too quickly.
The Financial stocks love to see yields move up as it helps their bottom line allowing them to raise their rates. But you can see this recent move higher hit a double top and they closed off their highs, Whether this triggers a meaningful pullback, I don't know, but a modest double top pullback is very possible. But this, and many other charts look very healthy - at least the ones that are not hitting the stratosphere like the ones up above.
Seasonality remains good this week, but the final days in August gets a little dicey.
Chart provided courtesy of www.sentimentrader.com
The S&P 500 (C-fund) makes a new high almost daily these days as it rides below the rising resistance of the trading channel. We've see sharp spikes higher, like the one we just had, several times this year and for the S&P 500, it has generally led to a slow and steady grind higher, or a little consolidation, but not much worse. Last year in early September the market saw a big thud that broke its bullish summer trend, so we'll be on the lookout for something similar.
The DWCPF (S-fund) led on the upside as it beat the S&P 500 large caps, and the Russell 2000 small cap indices, so it was the mid-caps that stole the show yesterday. It closed above the resistance line that we have noted for months, but there is some possible resistance at yesterday's high as we saw other July and August rallies stall there.
The EFA (EAFE Index / I-fund) was up slightly on a volatile day for the dollar so this index was a little choppy yesterday, and they gave the I-fund a loss on the day, perhaps some payback from Tuesday's big gain. There are open gaps above and below that can get filled at any time, but the overall look is a bullish chart for now.
The Dow Transportation Index closed back above the 50-day EMA but it is once again testing the longer term descending resistance line.
The BND (bonds / F-fund) fell sharply as the yield on the 10-year made a big move higher. It looks like the 50-day average will be tested again and obviously that needs to hold or we could see it come down to test the 200-day EMA and lower support line.
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.
