Stocks continued the April pullback yesterday as stocks gapped lower and while they fought back to close off the lows, the indices did post solid losses on the day. Higher yields hit the small caps particularly hard as the S-fund lost 1.5% on the day. The C and I-funds gave up about half of that, and bonds were down for a second day, although like stocks, they closed near the highs of the day.
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So far the market has made an April fool out of the bulls as the bears have hijacked this month's early seasonal strength. A 70% win rate on the 1st of April and a 62% win rate on the second is an impressive bullish bias but it is not 100%, and so far this year the less common outcome has occurred. But where does it go from here?
Chart provided courtesy of www.sentimentrader.com
Not that it matters but March started out with two down days in the first three days of trading, and it ended up fine, but pullbacks have to start somewhere, and maybe this is just the start.
Or is it? Here are the charts of the three TSP stock fund indices, plus the Nasdaq. The two day decline hasn't really done any technical damage, although the EFA (I-fund) did fall through its very short term 11-day average, which remarkably had held for the last 6 weeks. It also closed a few cents below its 20-day average, but the other three charts are still closing above the averages that have been holding all year.
They are not all using the same period averages, but some moving averages work better than others depending on the chart, and the key is to find out which are working at any given time for specific charts.
The 10-year Treasury Yield was the culprit yesterday as it broke above the inverted head and shoulders neckline. We didn't get much of a right shoulder so it is possible that it could come back down and churn in that area so I wouldn't surprised if this turns out to be a fake out move, although eventually it could go higher. We'll know soon enough and Friday's jobs report looms and it could make or break this chart.
Despite the breakout in yields yesterday, the probability of an interest rate cut in June went up, not down yesterday. The current rate is 525-550 basis points and the odds of a cut to 500-525 went up to 62% yesterday, from 57% the prior day. Perhaps because yields pulled back late in the trading session.
The price of oil is starting to get some attention as it moves up into the mid-80's, which is the highest price since last October. I found it interesting that when the "death cross" occurred, which is when the 50-day EMA crosses below the 200-day average, oil bottomed. That was supposed to be a bearish signal. Now we have a golden cross as the 50 has moved back above the 200. Is this bullish for oil or will it be a contrarian signal like the death cross was?
The Dow Transportation Index pulled back again and this time it completely filled the open gap from March 20, and it bounced off of the 50-day EMA. That average hasn't been overly significant on this chart in recent months, but it was clear support yesterday. This is still a large bull flag although the flag pole is off the chart on the left.
We'll get the March Friday's jobs report on Friday and estimates are looking for a gain of 200K to 210K jobs and an unemployment rate of 3.8%. However, it's getting difficult to trust either the estimates, and / or the reported numbers because the estimates have often been beaten substantially and then revised down in later months, making it tough to analyze or predict what's really going on. It has basically become a side show and an opportunity for day traders.
The S&P 500 (C-fund) gapped down sharply lower yesterday, but it clawed its way back to close back above the 15-day EMA, which has been holding all year. The blue boxes still look very similar and if that comparison is going to continue, we'd need to see it try to fill that gap today and not make a lower low. The bulls are still in control, but the bears are making their presence known.
DWCPF (S-fund) took a hard hit yesterday when yields broke out new multi-month highs. It did find support at its 30-day EMA again but if this plays out like similar pullbacks, it could churn near that average for a few days.
EFA (I-fund) was down but a dip in the dollar helped it outperform the C and S funds on the day, but there was some technical damage done to the charts with that 11-day average breaking for the first time in a couple of months. As I pointed out in recent commentaries, holding at the 11-day average was not going to be sustainable for too long so now we turn to other potential support levels. It remains in that range we have highlighted, and there is a small open gap just above 78.
BND (Bonds / F-fund) gapped lower at the open and was trading below its 50-day average, but it came back to close above it and regained more than half of the early losses. This looks like a must hold area as it has been tested a few times this year and held.
Thanks so much for reading! We'll see you back here tomorrow.
Tom Crowley
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
Daily Market Commentary Archives
To get weekly or daily notifications when we post new commentary, sign up HERE.
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="width: 284, align: center"] Daily TSP Funds Return
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[TD="align: right"][/TD]
[/TR]
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So far the market has made an April fool out of the bulls as the bears have hijacked this month's early seasonal strength. A 70% win rate on the 1st of April and a 62% win rate on the second is an impressive bullish bias but it is not 100%, and so far this year the less common outcome has occurred. But where does it go from here?
Chart provided courtesy of www.sentimentrader.com
Not that it matters but March started out with two down days in the first three days of trading, and it ended up fine, but pullbacks have to start somewhere, and maybe this is just the start.
Or is it? Here are the charts of the three TSP stock fund indices, plus the Nasdaq. The two day decline hasn't really done any technical damage, although the EFA (I-fund) did fall through its very short term 11-day average, which remarkably had held for the last 6 weeks. It also closed a few cents below its 20-day average, but the other three charts are still closing above the averages that have been holding all year.
They are not all using the same period averages, but some moving averages work better than others depending on the chart, and the key is to find out which are working at any given time for specific charts.
The 10-year Treasury Yield was the culprit yesterday as it broke above the inverted head and shoulders neckline. We didn't get much of a right shoulder so it is possible that it could come back down and churn in that area so I wouldn't surprised if this turns out to be a fake out move, although eventually it could go higher. We'll know soon enough and Friday's jobs report looms and it could make or break this chart.
Despite the breakout in yields yesterday, the probability of an interest rate cut in June went up, not down yesterday. The current rate is 525-550 basis points and the odds of a cut to 500-525 went up to 62% yesterday, from 57% the prior day. Perhaps because yields pulled back late in the trading session.
The price of oil is starting to get some attention as it moves up into the mid-80's, which is the highest price since last October. I found it interesting that when the "death cross" occurred, which is when the 50-day EMA crosses below the 200-day average, oil bottomed. That was supposed to be a bearish signal. Now we have a golden cross as the 50 has moved back above the 200. Is this bullish for oil or will it be a contrarian signal like the death cross was?
The Dow Transportation Index pulled back again and this time it completely filled the open gap from March 20, and it bounced off of the 50-day EMA. That average hasn't been overly significant on this chart in recent months, but it was clear support yesterday. This is still a large bull flag although the flag pole is off the chart on the left.
We'll get the March Friday's jobs report on Friday and estimates are looking for a gain of 200K to 210K jobs and an unemployment rate of 3.8%. However, it's getting difficult to trust either the estimates, and / or the reported numbers because the estimates have often been beaten substantially and then revised down in later months, making it tough to analyze or predict what's really going on. It has basically become a side show and an opportunity for day traders.
The S&P 500 (C-fund) gapped down sharply lower yesterday, but it clawed its way back to close back above the 15-day EMA, which has been holding all year. The blue boxes still look very similar and if that comparison is going to continue, we'd need to see it try to fill that gap today and not make a lower low. The bulls are still in control, but the bears are making their presence known.
DWCPF (S-fund) took a hard hit yesterday when yields broke out new multi-month highs. It did find support at its 30-day EMA again but if this plays out like similar pullbacks, it could churn near that average for a few days.
EFA (I-fund) was down but a dip in the dollar helped it outperform the C and S funds on the day, but there was some technical damage done to the charts with that 11-day average breaking for the first time in a couple of months. As I pointed out in recent commentaries, holding at the 11-day average was not going to be sustainable for too long so now we turn to other potential support levels. It remains in that range we have highlighted, and there is a small open gap just above 78.
BND (Bonds / F-fund) gapped lower at the open and was trading below its 50-day average, but it came back to close above it and regained more than half of the early losses. This looks like a must hold area as it has been tested a few times this year and held.
Thanks so much for reading! We'll see you back here tomorrow.
Tom Crowley
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
Daily Market Commentary Archives
To get weekly or daily notifications when we post new commentary, sign up HERE.
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.
