Stocks followed through on Thursday's negative reversal with another down day again on Friday. The Dow lost 182-points but more interesting is that the Nasdaq had its first 2-day losing streak since mid-May, or 49 days. Small caps got beaten up pretty good after holding up rather well during Thursday's decline. Bonds were down on Friday after 8 consecutive positive days for the BND bond ETF, and 15 of the last 18 trading days.
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We saw some possible technical hiccups created on the some of the charts on Friday, but for the most part they are holding up well. Obviously if the Nasdaq hasn't had a two-day decline in over two months, good things have been happening. But does snapping that streak mean anything? sentimenTrader.com looked back and the recent streak of 49 days without back to back losses ranks was the 2nd-longest streak going back to 1926, next to one that went 52 days ending in March 2012. They noted: "Once streaks longer than 30 days finally ended, it didn't mean much. Tech's returns going forward were almost perfectly in line with random. This kind of thing has proven to be maybe interesting, but not especially useful."
So it is what it is, I suppose. But not much help in the analysis.
It's a busy week on the economic calendar with an FOMC meeting and interest rate decision on Wednesday, although no changes are expected.
We get a Consumer Confidence report on Tuesday, which is expected to slip to about 95 from last month's 98.1.
Obviously the weekly initial and continuous jobless claims has been ticked up in importance this year, and that comes out on Thursdays.
Also on Thursday we get an interesting GDP report - the first estimate for the second quarter. After a 5% decline in the first quarter, the second quarter estimate is a whopping -35%. We all know the situation, and we knew it was coming, but seeing it in print is a little alarming. Clearly there has been a positive change in recent weeks to help reverse this, but not everyone seems to want to see that happen so quickly, in the name of safety first.
I don't know if the continued violence in some major cities is having an actual impact on the economy, but I assume to some degree it is keeping some consumers from going out shopping in those areas, which adds to the COVID stay home issues.
The S&P 500 (C-fund) posted a modest loss on Friday, and after two consecutive down days, it still above several key support areas, but the loss did clearly push it below some support that could wave some yellow flags from investors. On the plus side, we have seen so much bearishness in several key sentiment indicators that it seems unlikely that any more down side would be too severe. We have the 20-day EMA just below at 3189, then a rising support line near 3150 (blue), followed by the 50-day EMA (purple) at 3106.
The weekly chart saw a negative reversal candlestick created, although the last several weekly negative reversals like that actually preceded strong weeks for stocks. The overhead open gap above 3300 on the weekly chart is still there as a potential upside target.
The DWCPF (S-fund) closed below the old highs for a second straight day so at this point it is considered a failed breakout. Perhaps there's more churning to be done before we do see a breakout. I suppose this could be a peak forming, but the consolidating bullish looking formation leads me to believe that any further weakness could be short-lived.
The dollar has continued to slide and last week's breakdown was a good reason why the I-fund outperformed for the week, and so far for the month as well. It's also a good reason why gold and silver have been rallying lately.
The EFA (I-fund) was down on Friday despite that decline in the dollar, but the I-fund lost just 0.10% on the day compared to those larger losses in the C and S funds.
The High Yield Corporate Bond ETF was defying the stock market's dip and remaining resilient, which is another reason why I think any further downside may not be too extreme. Of course this could be a double top but the fact that it has tested that old high for four days in a row tells me that the sellers aren't being too aggressive.
BND (bond ETF) finally saw a down day but the rising trading channels remain intact.
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
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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[TD][/TD]
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We saw some possible technical hiccups created on the some of the charts on Friday, but for the most part they are holding up well. Obviously if the Nasdaq hasn't had a two-day decline in over two months, good things have been happening. But does snapping that streak mean anything? sentimenTrader.com looked back and the recent streak of 49 days without back to back losses ranks was the 2nd-longest streak going back to 1926, next to one that went 52 days ending in March 2012. They noted: "Once streaks longer than 30 days finally ended, it didn't mean much. Tech's returns going forward were almost perfectly in line with random. This kind of thing has proven to be maybe interesting, but not especially useful."
So it is what it is, I suppose. But not much help in the analysis.
It's a busy week on the economic calendar with an FOMC meeting and interest rate decision on Wednesday, although no changes are expected.
We get a Consumer Confidence report on Tuesday, which is expected to slip to about 95 from last month's 98.1.
Obviously the weekly initial and continuous jobless claims has been ticked up in importance this year, and that comes out on Thursdays.
Also on Thursday we get an interesting GDP report - the first estimate for the second quarter. After a 5% decline in the first quarter, the second quarter estimate is a whopping -35%. We all know the situation, and we knew it was coming, but seeing it in print is a little alarming. Clearly there has been a positive change in recent weeks to help reverse this, but not everyone seems to want to see that happen so quickly, in the name of safety first.
I don't know if the continued violence in some major cities is having an actual impact on the economy, but I assume to some degree it is keeping some consumers from going out shopping in those areas, which adds to the COVID stay home issues.
The S&P 500 (C-fund) posted a modest loss on Friday, and after two consecutive down days, it still above several key support areas, but the loss did clearly push it below some support that could wave some yellow flags from investors. On the plus side, we have seen so much bearishness in several key sentiment indicators that it seems unlikely that any more down side would be too severe. We have the 20-day EMA just below at 3189, then a rising support line near 3150 (blue), followed by the 50-day EMA (purple) at 3106.
The weekly chart saw a negative reversal candlestick created, although the last several weekly negative reversals like that actually preceded strong weeks for stocks. The overhead open gap above 3300 on the weekly chart is still there as a potential upside target.
The DWCPF (S-fund) closed below the old highs for a second straight day so at this point it is considered a failed breakout. Perhaps there's more churning to be done before we do see a breakout. I suppose this could be a peak forming, but the consolidating bullish looking formation leads me to believe that any further weakness could be short-lived.
The dollar has continued to slide and last week's breakdown was a good reason why the I-fund outperformed for the week, and so far for the month as well. It's also a good reason why gold and silver have been rallying lately.
The EFA (I-fund) was down on Friday despite that decline in the dollar, but the I-fund lost just 0.10% on the day compared to those larger losses in the C and S funds.
The High Yield Corporate Bond ETF was defying the stock market's dip and remaining resilient, which is another reason why I think any further downside may not be too extreme. Of course this could be a double top but the fact that it has tested that old high for four days in a row tells me that the sellers aren't being too aggressive.
BND (bond ETF) finally saw a down day but the rising trading channels remain intact.
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
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.
