Stocks bounced back on a Turnaround Tuesday after Monday's attempt to shake inventors out. The Dow gained back all of Monday's losses, with a 561-point gain while we saw gains near or above 2% in many of the broader indices. The small caps had a rare 3% gain yesterday, but that fund has been beaten down harder than most in recent weeks. Bonds (F-fund) were down as yields rallied.
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I've posted this image many times over the years (I checked and the image is dated 2011) which depicts one of the outcomes that can come from an inverted head and shoulders patterns, and of course the inverse is true on an upright head and shoulders pattern. It's called the head test, and it's something that can happen if we don't see a breakout out of the right shoulder initially, so it pulls back to test the head before moving back up toward the neckline again.
That failed breakout happened last week when the S&P 500 / C-fund failed to move above the neckline, and it then pulled back to test the head area. Will it now retest the neckline and breakout? It should, based on historical tendencies, but we know how that goes. Two good things happened in the process. The open gap from Monday was filled, and there was actually a gap opened on Tuesday morning, but an early pullback just after the opening bell was enough to fill it already.
The DWCPF (S-fund) was up big and the gap that opened on this chart yesterday was not filled so there's that to worry about. The action was so strong that it could be a gap and go, meaning it won't get filled for a while, but it's been so volatile lately, I don't know if we can count on that. The next test here would be getting back above the 200-day EMA (blue average.)
The EFA (I-fund) also had a good gain, recapturing its 200-day EMA. The 50-day EMA and the descending resistance line will be the next resistance test. There's also an open gap near the 200-day average that may get revisited.
BND (Bonds / F-fund) was down but rallied back from bigger earlier losses. I see a possible bull flag forming, but I didn't even draw it in because that big open gap below looks like the next potential target.
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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Internally it was about as strong as we've seen all year with advance / decline ratios of 3, 5, and up to 6.5 to 1 in some of the breadth numbers.
The Yield on the 10-year Treasury rose sharply yesterday, nearly hitting 1.5% again before pulling back a bit.
They are really pushing the Omicron but it doesn't seem to have much of a punch, at least to those who have been vaccinated, but I actually haven't heard of what is happening to the unvaccinated who catch it. The market suggested yesterday that it may be done with it, and obviously there is concern for safety, but the battle for the market may be more with the bureaucratic protocols, which could impede business, rather then the virus itself.
The stock market and the TSP will be closed on Friday observing the Christmas holiday. That leaves just six trading days left in the year. I'll leave you with some data I've compiled going back to the end of 1996 showing what happened on the final two trading days of the year, and the first three trading days of the New Year. I haven't dissected it too much yet but I did notice that not once were all 5 days positive. Once they were all down (2014 / 2015) and once 4 were down and one was flat (2004 / 2005.) Eight times there were 4 out of 5 days that were up. Six times there were at least 4 out of 5 down that were negative. Maybe you can find some kind of thread in the data that will help you decide where to have your money to start 2022.
The Yield on the 10-year Treasury rose sharply yesterday, nearly hitting 1.5% again before pulling back a bit.
They are really pushing the Omicron but it doesn't seem to have much of a punch, at least to those who have been vaccinated, but I actually haven't heard of what is happening to the unvaccinated who catch it. The market suggested yesterday that it may be done with it, and obviously there is concern for safety, but the battle for the market may be more with the bureaucratic protocols, which could impede business, rather then the virus itself.
The stock market and the TSP will be closed on Friday observing the Christmas holiday. That leaves just six trading days left in the year. I'll leave you with some data I've compiled going back to the end of 1996 showing what happened on the final two trading days of the year, and the first three trading days of the New Year. I haven't dissected it too much yet but I did notice that not once were all 5 days positive. Once they were all down (2014 / 2015) and once 4 were down and one was flat (2004 / 2005.) Eight times there were 4 out of 5 days that were up. Six times there were at least 4 out of 5 down that were negative. Maybe you can find some kind of thread in the data that will help you decide where to have your money to start 2022.
I've posted this image many times over the years (I checked and the image is dated 2011) which depicts one of the outcomes that can come from an inverted head and shoulders patterns, and of course the inverse is true on an upright head and shoulders pattern. It's called the head test, and it's something that can happen if we don't see a breakout out of the right shoulder initially, so it pulls back to test the head before moving back up toward the neckline again.
That failed breakout happened last week when the S&P 500 / C-fund failed to move above the neckline, and it then pulled back to test the head area. Will it now retest the neckline and breakout? It should, based on historical tendencies, but we know how that goes. Two good things happened in the process. The open gap from Monday was filled, and there was actually a gap opened on Tuesday morning, but an early pullback just after the opening bell was enough to fill it already.
The DWCPF (S-fund) was up big and the gap that opened on this chart yesterday was not filled so there's that to worry about. The action was so strong that it could be a gap and go, meaning it won't get filled for a while, but it's been so volatile lately, I don't know if we can count on that. The next test here would be getting back above the 200-day EMA (blue average.)
The EFA (I-fund) also had a good gain, recapturing its 200-day EMA. The 50-day EMA and the descending resistance line will be the next resistance test. There's also an open gap near the 200-day average that may get revisited.
BND (Bonds / F-fund) was down but rallied back from bigger earlier losses. I see a possible bull flag forming, but I didn't even draw it in because that big open gap below looks like the next potential target.
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.
