Stocks had one heck of a day yesterday with some dramatic positive reversals in many of the indices, while others continue to flounder. The Dow turned a near 300-point loss into a 110-point gain by the close. The Nasdaq posted a small loss after a morning trouncing, and the S&P 500 did what it does seemingly everyday, which is closed at a new high. Bonds were up, gold was up, oil was down but closed well off its lows.
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Caution! Paranoia talk in 3, 2, 1...
I don't care what those three indices say above, the action yesterday was not good. The buying going on at the morning lows and into the late afternoon was enough to push the Dow and S&P into positive record territory, while the Nasdaq turned a 200+ point loss into just a 29-point decline by the close. But internally the numbers tell a different story.
Are money managers artificially keeping the indices up by buying the biggest index movers, so that mom and pop will continue to believe everything is fine, buy the dips, while the big money is quietly selling under the radar?
Of course I don't know if that is true, but is there a better reason that the internals looked like this on a day when the major indices were making new highs - or close to it in the case of the Nasdaq? 281 new lows on the Nasdaq is an eye opener, but it did close nearly 200 point off its lows.
Perhaps it is more measured than that? The S&P 500 closed yesterday at 4480. The closing low during the Covid crash was 2237 on March 23, 2020. 4480 now makes it an official 100% gain since that closing low. Will that ring the bell at the top of this rally?
I don't know. Momentum is difficult to stop, and right now mom and pop are probably getting pretty excited about a doubling in their accounts over the last 17 months.
For those who don't pay attention and make their bi-weekly contribution to the TSP stocks funds, it doesn't matter. Their money is still going into stocks whether this is the top or not. Often ignorance is bliss as the buy and holders always look the smartest at market highs, and with new highs being made daily, they look pretty good right now. But they will also lose everything the market takes from them the next time there is a correction or bear market. Between the 2000 dot com bear market, the 2008 financial crisis, and the 2020 Covid crash, we saw losses from between 35% and about 78% depending on the index and the year. Yes, the Nasdaq lost 78% in the aftermath of the dot com bear market.
Ok, the paranoia rant is over. Back to our regularly scheduled programming...
The 10-year yield fell again after some weak economic data out of China. A gap was filled and it rallied off those lows.
While China is not in our I-fund, Japan is and I continue to watch this largest holding of the I-fund come down from the February highs and now it flirts with a major breakdown below some key support and the 200-day EMA. It's not shown but it is already below the 200-day simple average.
The S&P 500 (C-fund) had a very odd day as the bears looked serious at the opening bell, but the bulls just laughed, pushed them aside, and took over. At least that's the case for the S&P, and not so much for some of the other indices. The chart pushed above the top of the trading channel using the 50-day EMA as the lower end of the channel. I would say that yesterday's breakout could be a fake-out, but momentum has been so strong that there's a good chance that I'm wrong. But, Turnaround Tuesday, anyone?
The DWCPF (S-fund) gapped lower at the open and that gap is still partially open despite a midday rally that nearly got back all of the morning losses. The index faded again later in the day and closed below the 50-day EMA, but it may once again be a case where the 50-day EMA is going to try to hold. It hasn't held every time, but most of the time this year.
The EFA (EAFE Index / I-fund) was down and it too opened a small gap. This one did close near the highs of the day despite the losses. That 81 area may be some resistance now that it fell below those rising support lines. The double top pullback is still in play.
The Dow Transportation Index actually had a good day and led the way on the upside, breaking above the descending resistance line in the process. This one has had a mind of its own since it has been in a down trend since the peak in May. Perhaps it can do well while the rest of the market digests their recent gains?
The BND (bonds / F-fund) rallied early on the China economic data, but settled down the rest of the day, using the old trading channel's resistance line as support. It also filled the gap before backing off so maybe the rally was just a cleaning up exercise?
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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Caution! Paranoia talk in 3, 2, 1...
I don't care what those three indices say above, the action yesterday was not good. The buying going on at the morning lows and into the late afternoon was enough to push the Dow and S&P into positive record territory, while the Nasdaq turned a 200+ point loss into just a 29-point decline by the close. But internally the numbers tell a different story.
Are money managers artificially keeping the indices up by buying the biggest index movers, so that mom and pop will continue to believe everything is fine, buy the dips, while the big money is quietly selling under the radar?
Of course I don't know if that is true, but is there a better reason that the internals looked like this on a day when the major indices were making new highs - or close to it in the case of the Nasdaq? 281 new lows on the Nasdaq is an eye opener, but it did close nearly 200 point off its lows.
Perhaps it is more measured than that? The S&P 500 closed yesterday at 4480. The closing low during the Covid crash was 2237 on March 23, 2020. 4480 now makes it an official 100% gain since that closing low. Will that ring the bell at the top of this rally?
I don't know. Momentum is difficult to stop, and right now mom and pop are probably getting pretty excited about a doubling in their accounts over the last 17 months.
For those who don't pay attention and make their bi-weekly contribution to the TSP stocks funds, it doesn't matter. Their money is still going into stocks whether this is the top or not. Often ignorance is bliss as the buy and holders always look the smartest at market highs, and with new highs being made daily, they look pretty good right now. But they will also lose everything the market takes from them the next time there is a correction or bear market. Between the 2000 dot com bear market, the 2008 financial crisis, and the 2020 Covid crash, we saw losses from between 35% and about 78% depending on the index and the year. Yes, the Nasdaq lost 78% in the aftermath of the dot com bear market.
Ok, the paranoia rant is over. Back to our regularly scheduled programming...
The 10-year yield fell again after some weak economic data out of China. A gap was filled and it rallied off those lows.
While China is not in our I-fund, Japan is and I continue to watch this largest holding of the I-fund come down from the February highs and now it flirts with a major breakdown below some key support and the 200-day EMA. It's not shown but it is already below the 200-day simple average.
The S&P 500 (C-fund) had a very odd day as the bears looked serious at the opening bell, but the bulls just laughed, pushed them aside, and took over. At least that's the case for the S&P, and not so much for some of the other indices. The chart pushed above the top of the trading channel using the 50-day EMA as the lower end of the channel. I would say that yesterday's breakout could be a fake-out, but momentum has been so strong that there's a good chance that I'm wrong. But, Turnaround Tuesday, anyone?
The DWCPF (S-fund) gapped lower at the open and that gap is still partially open despite a midday rally that nearly got back all of the morning losses. The index faded again later in the day and closed below the 50-day EMA, but it may once again be a case where the 50-day EMA is going to try to hold. It hasn't held every time, but most of the time this year.
The EFA (EAFE Index / I-fund) was down and it too opened a small gap. This one did close near the highs of the day despite the losses. That 81 area may be some resistance now that it fell below those rising support lines. The double top pullback is still in play.
The Dow Transportation Index actually had a good day and led the way on the upside, breaking above the descending resistance line in the process. This one has had a mind of its own since it has been in a down trend since the peak in May. Perhaps it can do well while the rest of the market digests their recent gains?
The BND (bonds / F-fund) rallied early on the China economic data, but settled down the rest of the day, using the old trading channel's resistance line as support. It also filled the gap before backing off so maybe the rally was just a cleaning up exercise?
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.
