The market bounced back on Friday after Thursday's surprise sell-off. I say surprise because the indices were due for some kind of a pause at the least from the recent relentless rally, but the magnitude of Thursday's decline was unexpected by most. The Dow gained back 477-points on Friday, which sounds really good, but just 25% of Thursday's 1862-point loss. I guess you have to start somewhere, but being that the highs were made near the opening bell on Friday, the action wasn't overly impressive.
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It was impressive that after two failed rallies during the day, that investors were buying into the weekend as the day ended with a two hour rally into the close, but I see that the futures opened sharply lower - completely erasing Friday's gains, but that was early on Sunday evening and it doesn't always reflect what happens at Monday morning's opening. The action early this week could be a decent tell for what's in store for stocks for the more intermediate term. There are several indices on the brink of a bounce off support, or a breakdown below it.
The Nasdaq 100 Index (QQQ is the ETF) has been riding high and made new all-time highs in the last week or two, and because of how narrow the rising trading channel is, it only took a day to go from what looked like a false breakout above the top of the channel, to a test of the bottom end of the channel. It had a modest bounce on Friday that saw support hold, and that is important, but it wasn't all that impressive after Thursday's giant losses. That's why the action on Monday and Tuesday could be very telling. Is the market really worried about another wave of the coronavirus? This chart may tell us in a day or two.
With interest rates and bond yields still about as low as we've ever seen them, the bank stocks may be starting to suffer again. The Bank Index chart hit the 200-day EMA a few days ago and was smacked down, as you might expect to see in a bear market. So again, how this week starts, a bounce off of support or a breakdown below it, may be very telling for what the summer has in store for the market.
The economy was crushed by the coronavirus precautions earlier in the year. Then we saw things opening up again with some optimistic jump in new jobs last month, but here we go again with calls for another wave of the coronavirus. The Fed seems to have confirmed that they are willing to go all in to help, so the question going forward will be whether the Fed's toolbox can hold back another possible wave of economic trouble. As the protests and riots start to back ff, I'd expect the media to go back to 24 / 7 COVID coverage. The question will be whether the public and the stock market will react in the same way that they did in the first round. Fool me once....?
The S&P 500 (C-fund) got a modest boost off of the 200 day averages on Friday, after Thursday big sell off. Either Thursday's action was an anomaly, something similar to a flash crash, or it may have rung the bell at the top for the market. Watching the key rising support below is our best bet in knowing how this may play out.
The weekly chart of the S&P 500 shows what we talked about a while back where any push above or below that rising red trading channel, probably needed to be faded. A move above it had to be sold, and as we found out in March, the fall below it should have been bought. That was a severe breakdown and not something that would have been an automatic buy, unless in hindsight.
The Equal Weight S&P 500 led on the upside on Friday with a 2% gain as the high flying large tech stocks of the Nasdaq 100, that we posted up above, was up less than 1% on Friday. It looks like the rising channel is firmly intact, but I can't help but see large bear flags still on the charts with March's crash being the flag pole.
The DWCPF (S-fund) bounced back with the rest of the market and these small caps just seem to have a higher beta, meaning when stocks go up, these go higher. When stocks go down, these get hammered. 1300 looks to be an important level.
The EFA (I-fund) had broken out above its rising trading channel, but the gap down on Wednesday brought it back within the channel. There are open gaps all over this chart so I didn't draw them in, but if that new overhead gap does get filled, there is a lot of resistance so it may be tough for this one to breakout to new highs again any time soon, although the market strength hasn't failed to surprise me since the lows.
The BND (F-fund) was up on Friday but because the TSP gave the F-fund such a good price on Thursday, it had to take away a little on Friday. Because the bond market closes an hour before the stock market, and the BND trades on the stock market for that extra hour, the F-fund price can get skewed from the BND price.
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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It was impressive that after two failed rallies during the day, that investors were buying into the weekend as the day ended with a two hour rally into the close, but I see that the futures opened sharply lower - completely erasing Friday's gains, but that was early on Sunday evening and it doesn't always reflect what happens at Monday morning's opening. The action early this week could be a decent tell for what's in store for stocks for the more intermediate term. There are several indices on the brink of a bounce off support, or a breakdown below it.
The Nasdaq 100 Index (QQQ is the ETF) has been riding high and made new all-time highs in the last week or two, and because of how narrow the rising trading channel is, it only took a day to go from what looked like a false breakout above the top of the channel, to a test of the bottom end of the channel. It had a modest bounce on Friday that saw support hold, and that is important, but it wasn't all that impressive after Thursday's giant losses. That's why the action on Monday and Tuesday could be very telling. Is the market really worried about another wave of the coronavirus? This chart may tell us in a day or two.
With interest rates and bond yields still about as low as we've ever seen them, the bank stocks may be starting to suffer again. The Bank Index chart hit the 200-day EMA a few days ago and was smacked down, as you might expect to see in a bear market. So again, how this week starts, a bounce off of support or a breakdown below it, may be very telling for what the summer has in store for the market.
The economy was crushed by the coronavirus precautions earlier in the year. Then we saw things opening up again with some optimistic jump in new jobs last month, but here we go again with calls for another wave of the coronavirus. The Fed seems to have confirmed that they are willing to go all in to help, so the question going forward will be whether the Fed's toolbox can hold back another possible wave of economic trouble. As the protests and riots start to back ff, I'd expect the media to go back to 24 / 7 COVID coverage. The question will be whether the public and the stock market will react in the same way that they did in the first round. Fool me once....?
The S&P 500 (C-fund) got a modest boost off of the 200 day averages on Friday, after Thursday big sell off. Either Thursday's action was an anomaly, something similar to a flash crash, or it may have rung the bell at the top for the market. Watching the key rising support below is our best bet in knowing how this may play out.
The weekly chart of the S&P 500 shows what we talked about a while back where any push above or below that rising red trading channel, probably needed to be faded. A move above it had to be sold, and as we found out in March, the fall below it should have been bought. That was a severe breakdown and not something that would have been an automatic buy, unless in hindsight.
The Equal Weight S&P 500 led on the upside on Friday with a 2% gain as the high flying large tech stocks of the Nasdaq 100, that we posted up above, was up less than 1% on Friday. It looks like the rising channel is firmly intact, but I can't help but see large bear flags still on the charts with March's crash being the flag pole.
The DWCPF (S-fund) bounced back with the rest of the market and these small caps just seem to have a higher beta, meaning when stocks go up, these go higher. When stocks go down, these get hammered. 1300 looks to be an important level.
The EFA (I-fund) had broken out above its rising trading channel, but the gap down on Wednesday brought it back within the channel. There are open gaps all over this chart so I didn't draw them in, but if that new overhead gap does get filled, there is a lot of resistance so it may be tough for this one to breakout to new highs again any time soon, although the market strength hasn't failed to surprise me since the lows.
The BND (F-fund) was up on Friday but because the TSP gave the F-fund such a good price on Thursday, it had to take away a little on Friday. Because the bond market closes an hour before the stock market, and the BND trades on the stock market for that extra hour, the F-fund price can get skewed from the BND price.
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.
