Stocks started the week in some trouble, but somebody flipped a switch on Turnaround Tuesday, and for the big three indices, Dow, S&P 500, and Nasdaq, it was smooth sailing for the rest of the week, including a big rally on Friday that sent them to new highs. The small caps also had a big week but it was little more volatile with one big loss on Thursday after the weak jobless claims report. Bonds were down - yields up. The dollar was up slightly and oil moved back above $72 a barrel.
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As good of a day that it was for the indices on Friday, we continue to see a negative divergence with the advance / decline numbers, especially in volume. Incredibly there was nearly 2 to 1 declining shares traded over the advancing volume on the NYSE, and it was fairly even on the Nasdaq despite the 1% gain. Also, with the Nasdaq reaching an all time high, there were again triple digit new 52-lows made. Go figure.
The yield on the 10-year was up again, but there should be an interesting test of that 1.33% area where the 200-day EMA meets the descending resistance line.
The dollar managed another small gain so the rally is now over a month old.
It doesn't seem to be a problem for the big three indices. You can see that the S&P 500 has been plodding higher with every test of the 50-day EMA holding. But if you look at the next three cart below it, the Equal Weighted S&P 500, the NYSE Composite, and the Russell 2000, you can see that they are either only testing the high from back in early May...
Or in the case of the Russell 2000 (IWM) still well off those highs. That true of the Dow Transportation Index as well as you'll see down below.
So what is really going on with the stock market? Is this a stealth correction that is impacting many stocks individually, but just not the large mega cap stocks that are doing the heavy lifting for the indices? If so, how long can it last, and which will happen first -- the broader indices will catch up to the large caps, or will the major indices finally have a serious correction?
The final week of July is generally bullish although some choppiness over the years, and this year we get a wave of big tech earnings during the final week of July. Then we'll head into August which is one of the worst months for stocks historically as far as percentage of time it is positive. We saw big gains in August of 2020, however.
The S&P 500 (C-fund) made another new high after another successful test of the 50-day EMA to start the week last week. There's some resistance just above, but it is rising resistance. The PMO indicator looks ready to move back above its moving average again, but it is still well below the reading from back in April and May, despite how well the indices is doing. Again, the headline new highs of the indices is overshadowing some internal weakness.
This chart shows similar breakout set ups this year to the one we are seeing now. Both of the prior similar moves led to more short-term gains, but the one in February flipped over a few days later. In April stocks just continued to move higher for weeks.
The DWCPF (S-fund) is lagging behind the big three indices but it looks like we have another "V" type low. It moved above the 50-day EMA on Wednesday and despite the selling on Thursday, it was able to hold above it again. There has been some resistance in that 2250 area
The EFA / I-fund is also back above its 50-day EMA but with the dollar rallying recently, it has been the lagging TSP stock fund. There is an open gap both above and below the current level, and there is descending resistance in the 79.25 area.
The Dow Transportation Index has also been lagging, but late last week it managed to get back above that 100-day EMA and the descending resistance line. Is this one ready to join the bullish parade or was the Dow Theory Sell Signal that we saw a while back still telling us that the broader stock market may be in some trouble?
The BND (bonds / F-fund) was down on Friday with that move up in yields. The chart looks a little toppy with that major negative reversal day last Tuesday. However, the top of that trading channel has done a good job of acting as support since the breakout earlier this month.
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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As good of a day that it was for the indices on Friday, we continue to see a negative divergence with the advance / decline numbers, especially in volume. Incredibly there was nearly 2 to 1 declining shares traded over the advancing volume on the NYSE, and it was fairly even on the Nasdaq despite the 1% gain. Also, with the Nasdaq reaching an all time high, there were again triple digit new 52-lows made. Go figure.
The yield on the 10-year was up again, but there should be an interesting test of that 1.33% area where the 200-day EMA meets the descending resistance line.
The dollar managed another small gain so the rally is now over a month old.
It doesn't seem to be a problem for the big three indices. You can see that the S&P 500 has been plodding higher with every test of the 50-day EMA holding. But if you look at the next three cart below it, the Equal Weighted S&P 500, the NYSE Composite, and the Russell 2000, you can see that they are either only testing the high from back in early May...
Or in the case of the Russell 2000 (IWM) still well off those highs. That true of the Dow Transportation Index as well as you'll see down below.
So what is really going on with the stock market? Is this a stealth correction that is impacting many stocks individually, but just not the large mega cap stocks that are doing the heavy lifting for the indices? If so, how long can it last, and which will happen first -- the broader indices will catch up to the large caps, or will the major indices finally have a serious correction?
The final week of July is generally bullish although some choppiness over the years, and this year we get a wave of big tech earnings during the final week of July. Then we'll head into August which is one of the worst months for stocks historically as far as percentage of time it is positive. We saw big gains in August of 2020, however.
The S&P 500 (C-fund) made another new high after another successful test of the 50-day EMA to start the week last week. There's some resistance just above, but it is rising resistance. The PMO indicator looks ready to move back above its moving average again, but it is still well below the reading from back in April and May, despite how well the indices is doing. Again, the headline new highs of the indices is overshadowing some internal weakness.
This chart shows similar breakout set ups this year to the one we are seeing now. Both of the prior similar moves led to more short-term gains, but the one in February flipped over a few days later. In April stocks just continued to move higher for weeks.
The DWCPF (S-fund) is lagging behind the big three indices but it looks like we have another "V" type low. It moved above the 50-day EMA on Wednesday and despite the selling on Thursday, it was able to hold above it again. There has been some resistance in that 2250 area
The EFA / I-fund is also back above its 50-day EMA but with the dollar rallying recently, it has been the lagging TSP stock fund. There is an open gap both above and below the current level, and there is descending resistance in the 79.25 area.
The Dow Transportation Index has also been lagging, but late last week it managed to get back above that 100-day EMA and the descending resistance line. Is this one ready to join the bullish parade or was the Dow Theory Sell Signal that we saw a while back still telling us that the broader stock market may be in some trouble?
The BND (bonds / F-fund) was down on Friday with that move up in yields. The chart looks a little toppy with that major negative reversal day last Tuesday. However, the top of that trading channel has done a good job of acting as support since the breakout earlier this month.
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.
