Stocks battled back late from a sluggish Friday to close with gains in the major indices. The Dow was negative for most of the day but closed up up 13-points while the small caps came roaring back after Thursday's positive reversal day. The I-fund paid the price for a 0.50% gain in the dollar on Friday, and lagged the gains in U.S. TSP stock funds. Bonds were down and the dollar was up.
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There's a lot of cross-currents out there right now with inflation concerns rising, yet bond yields are falling. The price of oil is flying, while the Transports are pulling back. The giant rally in lumber (up 168% since January) is now down about 40% from its May high, despite the dollar being basically flat during that same period.
Some charts do look as if they want to break out after having consolidated since the May 7th high in the case of the S&P 500. So, this looks pretty bullish, despite the potential for a double top pullback, but the bears have done little to show they have interest in pulling this down from the recent highs. It may take a headline to change things.
Speaking of headlines, there is a 2-day FOMC meeting this week starting on Tuesday. No changes in interest rates is expected, but any change in policy could be a market mover.
As for the smalls caps of the S-fund, this chart shows the ratio between the S ($dwcpf) and C ($spx) funds. After the small caps led for months heading into this year, they started to lag the large caps after the after the ratio peaked in February. The S-fund then spent the next several weeks running behind the C-fund, but since we got into June, the trend seems to be changing back to the small caps' favor again as the resistance line of the ratio has broken.
The dollar rallied nicely on Friday and that may have been what kept stocks flat to lower most of the day before that late push higher in the final 30 minutes of the day on Friday. The 50-day EMA was the peak on Friday, and the question for this week will be whether the dollar rolls back over, or if it can take out the 50-day EMA, which could shake up the markets.
The S&P 500 (C-fund) made another new closing high on Friday on fairly light trading volume. As the rising support line met the May 7th highs resistance line, we knew something had to give, and on Friday the resistance gave way first. Monday and Tuesday will be interesting to see if the light volume breakout is for real or not. It's a bullish pattern - sort of a cup and handle formation, so I have to give the bulls the nod. But beware of the fake breakout. When breakouts stall and fail, the selling can happen swiftly.
The DWCPF (S-fund) has easily been cutting though resistance lines in June. The pullback last week was quickly reversed after it hit that rising support line. 2260 has been a tough area of resistance this year.
The EFA (I-fund) rallied but as we saw, the I-fund was flat as they took the strong dollar into account. It continues to ride long the bottom of the rising resistance line. One support line was broken, but so far the bears have not been selling it. It looks a little extended but the momentum is still on the bulls' side.
The Dow Transportation Index got a bounce off the 50-day EMA just after it fell below the trading channel resistance line, so it is now back inside that channel. It looks like a healthy consolidation, and as long as it remains above the 50-day EMA, the bulls remain in charge. If it falls below 15,200, the bears will have their chance.
The price of oil has a negative impact on the Transports as far as raising the cost of doing business for airlines, trucking, etc. A $71 / barrel price will also keep gasoline prices elevated and that will eventually hurt consumers. It's basically the equivalent of a tax hike, and that could stymie the economic recovery.
BND (bonds / F-fund) was flat to slightly lower on Friday after breaking out above some resistance and the 200-day EMA last week. Is this on its way to fill that overhear open gap? Why, I'm not sure, but at least that would give a technical reason for it to rally, even if fundamentally it isn't making a lot of sense to me.
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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There's a lot of cross-currents out there right now with inflation concerns rising, yet bond yields are falling. The price of oil is flying, while the Transports are pulling back. The giant rally in lumber (up 168% since January) is now down about 40% from its May high, despite the dollar being basically flat during that same period.
Some charts do look as if they want to break out after having consolidated since the May 7th high in the case of the S&P 500. So, this looks pretty bullish, despite the potential for a double top pullback, but the bears have done little to show they have interest in pulling this down from the recent highs. It may take a headline to change things.
Speaking of headlines, there is a 2-day FOMC meeting this week starting on Tuesday. No changes in interest rates is expected, but any change in policy could be a market mover.
As for the smalls caps of the S-fund, this chart shows the ratio between the S ($dwcpf) and C ($spx) funds. After the small caps led for months heading into this year, they started to lag the large caps after the after the ratio peaked in February. The S-fund then spent the next several weeks running behind the C-fund, but since we got into June, the trend seems to be changing back to the small caps' favor again as the resistance line of the ratio has broken.
The dollar rallied nicely on Friday and that may have been what kept stocks flat to lower most of the day before that late push higher in the final 30 minutes of the day on Friday. The 50-day EMA was the peak on Friday, and the question for this week will be whether the dollar rolls back over, or if it can take out the 50-day EMA, which could shake up the markets.
| Admin note: The Last Look Report is now a premium service. The info will come in a daily email from TommyIV about 30 minutes before the IFT deadline to help us make any last minute allocation decisions. It will also be posted in the premium area in case your email provider is delaying delivery, as we have seen with gmail during the trial period. The service will evolve after we get started as we plan on trying to incorporate a text messaging service for top 50 AutoTracker IFTs, but again we have to get passed the logistics of trying not to get blocked when sending out so many notifications. The cost of the service is $10 a month, or $5 for those already subscribed to another service. You can view a sample of what subscribers may get each morning, and there's a place to add you email to the list to receive the free report this week. The Last Look Report Info |
The S&P 500 (C-fund) made another new closing high on Friday on fairly light trading volume. As the rising support line met the May 7th highs resistance line, we knew something had to give, and on Friday the resistance gave way first. Monday and Tuesday will be interesting to see if the light volume breakout is for real or not. It's a bullish pattern - sort of a cup and handle formation, so I have to give the bulls the nod. But beware of the fake breakout. When breakouts stall and fail, the selling can happen swiftly.
The DWCPF (S-fund) has easily been cutting though resistance lines in June. The pullback last week was quickly reversed after it hit that rising support line. 2260 has been a tough area of resistance this year.
The EFA (I-fund) rallied but as we saw, the I-fund was flat as they took the strong dollar into account. It continues to ride long the bottom of the rising resistance line. One support line was broken, but so far the bears have not been selling it. It looks a little extended but the momentum is still on the bulls' side.
The Dow Transportation Index got a bounce off the 50-day EMA just after it fell below the trading channel resistance line, so it is now back inside that channel. It looks like a healthy consolidation, and as long as it remains above the 50-day EMA, the bulls remain in charge. If it falls below 15,200, the bears will have their chance.
The price of oil has a negative impact on the Transports as far as raising the cost of doing business for airlines, trucking, etc. A $71 / barrel price will also keep gasoline prices elevated and that will eventually hurt consumers. It's basically the equivalent of a tax hike, and that could stymie the economic recovery.
BND (bonds / F-fund) was flat to slightly lower on Friday after breaking out above some resistance and the 200-day EMA last week. Is this on its way to fill that overhear open gap? Why, I'm not sure, but at least that would give a technical reason for it to rally, even if fundamentally it isn't making a lot of sense to me.
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.
