Stocks opened higher on Friday but tumbled late and the bear market-like action continues. The Dow lost another 500-points and those large tech stock of the Nasdaq really got crushed. Most of this selling came on the heals of rumors of the Russia / Ukraine conflict heating up. Bonds rallied as the threat of war could impact the economy so yields slipped, and bonds and gold are the types of safe havens that tend to hold up better when investors are bailing on stocks.
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The S&P 500 failed again at some serious resistance areas last week, and Thursday and Friday's plunge took it out of its recent ascending trading channel. It did hold at the 200-day EMA, which is a good sign, but it also did that on Friday, January 21st, before it broke down on the following Monday the 24th. So perhaps we get a bounce here, but I still think a test of the lows is very possible.
Here's a clean look at the chart without the moving averages and trendlines, and the bull flag that had me optimistic last week, broke down on Friday. I'm not sure what else to do with this information but be concerned. Could it turn right back up? Sure. Is a test of the lows possible? Absolutely. Could it trade within a range of 4200 and 4650 for a while. Sounds reasonable. So there's our choices.
The weekly chart shows the big bounce off the January lows and the failure at the bottom of the old trading channel (green.) So it's above the 50-week EMA, which tends to be a good sign, but it just fell back below the 40-week moving average, which is another widely followed moving average, so we could see some algorithms hitting the sell button while this trades below that 4464 area.
The DWCPF (small caps / S-fund) is another chart that broke down below some key support after failing at resistance. The bear flag breakdown may have started. This seems to be in trouble unless perhaps Friday's extreme late selling was overdone and the breakdown turns out to be a fake out.
The EFA (I-fund) chart is in the same situation - breakdowns after failing at resistance.
BND (Bonds / F-fund) finally got a bit of a relief rally on Friday after the CPI sell off on Thursday. As I said above, if the Russia / Ukraine conflict heats up, investors may put money to work in bonds as it tends to be a safe haven when times get tough.
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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The CPI report lit this candle on Thursday and it is starting to look like the relief rally may have run its course. We get the PPI Report (Producer Price Index) on Tuesday of this week and perhaps that could turn the ship back around, but the charts would indicate that there may be more rough waters to navigate.
One potential positive note this week is the seasonality chart for February as this is an options expiration week, and stocks tend to do well, but after that, it's not so good. The question is whether they can hold up this week given the current geopolitical environment.
Chart provided courtesy of www.sentimentrader.com
The yield on the 10-year Treasury moved over 2% last week, but the Russia / Ukraine news was enough to see it close back below that level on Friday.
The dollar also reversed from its recent decline - filled one open gap (blue) and may be eying other open gaps (red) above, but there are other obstacles in the way.
The HYG High Yield Corporate Bond Fund has been the canary in the coal mine for weeks now as it suggests weakness in the credit market and if this follows its normal pattern of leading the stock market, it may be a good indication of where stocks may be heading.
We have a plethora of charts that broke down on Friday and we are seeing these bear flag breakdowns all over. Here's the Semiconductors just showing awful technicals as overhead resistance held, and support broke.
Because it is an options expiration week I don't think we can definitively guess what is coming. Large traders who have futures and options contracts expiring will do their best to push the indices around, perhaps keeping things afloat to avoid having the contracts expire worthless, but even if they are able to do that in this fast moving volatile environment, the week following options expiration week tends to be quite negative for stocks.
One potential positive note this week is the seasonality chart for February as this is an options expiration week, and stocks tend to do well, but after that, it's not so good. The question is whether they can hold up this week given the current geopolitical environment.
Chart provided courtesy of www.sentimentrader.com
The yield on the 10-year Treasury moved over 2% last week, but the Russia / Ukraine news was enough to see it close back below that level on Friday.
The dollar also reversed from its recent decline - filled one open gap (blue) and may be eying other open gaps (red) above, but there are other obstacles in the way.
The HYG High Yield Corporate Bond Fund has been the canary in the coal mine for weeks now as it suggests weakness in the credit market and if this follows its normal pattern of leading the stock market, it may be a good indication of where stocks may be heading.
We have a plethora of charts that broke down on Friday and we are seeing these bear flag breakdowns all over. Here's the Semiconductors just showing awful technicals as overhead resistance held, and support broke.
Because it is an options expiration week I don't think we can definitively guess what is coming. Large traders who have futures and options contracts expiring will do their best to push the indices around, perhaps keeping things afloat to avoid having the contracts expire worthless, but even if they are able to do that in this fast moving volatile environment, the week following options expiration week tends to be quite negative for stocks.
The S&P 500 failed again at some serious resistance areas last week, and Thursday and Friday's plunge took it out of its recent ascending trading channel. It did hold at the 200-day EMA, which is a good sign, but it also did that on Friday, January 21st, before it broke down on the following Monday the 24th. So perhaps we get a bounce here, but I still think a test of the lows is very possible.
Here's a clean look at the chart without the moving averages and trendlines, and the bull flag that had me optimistic last week, broke down on Friday. I'm not sure what else to do with this information but be concerned. Could it turn right back up? Sure. Is a test of the lows possible? Absolutely. Could it trade within a range of 4200 and 4650 for a while. Sounds reasonable. So there's our choices.
The weekly chart shows the big bounce off the January lows and the failure at the bottom of the old trading channel (green.) So it's above the 50-week EMA, which tends to be a good sign, but it just fell back below the 40-week moving average, which is another widely followed moving average, so we could see some algorithms hitting the sell button while this trades below that 4464 area.
The DWCPF (small caps / S-fund) is another chart that broke down below some key support after failing at resistance. The bear flag breakdown may have started. This seems to be in trouble unless perhaps Friday's extreme late selling was overdone and the breakdown turns out to be a fake out.
The EFA (I-fund) chart is in the same situation - breakdowns after failing at resistance.
BND (Bonds / F-fund) finally got a bit of a relief rally on Friday after the CPI sell off on Thursday. As I said above, if the Russia / Ukraine conflict heats up, investors may put money to work in bonds as it tends to be a safe haven when times get tough.
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.
