Small caps led the way again yesterday as those regional bank stocks are making a comeback and taking the S-fund with them. The Dow was basically flat and the larger cap indices were up moderately, but the Russell 2000 and the DWCPF (S-fund) gained 2.63% and 1.84% respectively, after the regional bank ETF gained a whopping 5% on the day. Bonds were up slightly, and the dollar is back flirting with its recent highs.
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On a day that saw the Dow up just 0.03%, we can see the positive breadth in the exchanges yesterday with almost 4 stocks up for every one that was down on the NYSE, and almost 3 to 1 on the Nasdaq, so the major indices did not reflect the internal strength. That's quite a change from prior months when the largest 7 stocks were basically dictating the direction of the market.
The DWCPF (S-fund) was up sharply, and the chart below that shows us why. KRE, the small regional bank index, was up 5% on the day and it cracked above the 50-day EMA for the first time since February.
This chart may not be completely out of trouble with that bearish looking flag getting tested, but the DWCPF did blast through its resistance recently so we'll see if the small banks, which held the small caps back for months, can now be a catalyst on the upside -- or not.
The Dow Transportation Index is a key index in conveying economic strength and tends to lead, but it has been lagging on its own, especially since small caps have come out of their funk. This chart continues to linger below the 200-day EMA as well as the 300-day EMA, and they have been a tough wall to climb.
It's a quiet week for economic data but next week we will get both the CPI and the PPI pricing reports before the Fed's decision on interest rates on Wednesday (of next week.)
The S&P 500 (C-fund) bounced back from Monday's small loss with a modest gain to actually close at a new 2023 high. It is stalling a bit here at the top of its rising trading channel, and there is a small open gap below that may need some attention. Technically it could pull back all the way to 4150 and remain in that rising channel, but the bulls may try to defend 4200 on any dip. Trading volume has been light so money managers may not be participating, and that means there could be a lot of cash on the sidelines to fuel this rally- IF they eventually buy.
The EFA (I-fund) bottomed last week when the dollar peaked, which is something we might expect, but the dollar has bounced back over the last three trading days while the I-fund has been rallying. I think something is going to have to give here. Either the dollar pulls back while the I-fund challenges the old highs, or the dollar makes new highs and the I-fund may hit the breaks again.
BND (Bonds / F-fund) was up as yields were spilt with the 30-year and very short term bond yields falling while the 10-year was up. Lots of resistance near 73 and an open gap near 72.15 making this a little vulnerable in the short-term.
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 so much 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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On a day that saw the Dow up just 0.03%, we can see the positive breadth in the exchanges yesterday with almost 4 stocks up for every one that was down on the NYSE, and almost 3 to 1 on the Nasdaq, so the major indices did not reflect the internal strength. That's quite a change from prior months when the largest 7 stocks were basically dictating the direction of the market.
The DWCPF (S-fund) was up sharply, and the chart below that shows us why. KRE, the small regional bank index, was up 5% on the day and it cracked above the 50-day EMA for the first time since February.
This chart may not be completely out of trouble with that bearish looking flag getting tested, but the DWCPF did blast through its resistance recently so we'll see if the small banks, which held the small caps back for months, can now be a catalyst on the upside -- or not.
The Dow Transportation Index is a key index in conveying economic strength and tends to lead, but it has been lagging on its own, especially since small caps have come out of their funk. This chart continues to linger below the 200-day EMA as well as the 300-day EMA, and they have been a tough wall to climb.
It's a quiet week for economic data but next week we will get both the CPI and the PPI pricing reports before the Fed's decision on interest rates on Wednesday (of next week.)
The S&P 500 (C-fund) bounced back from Monday's small loss with a modest gain to actually close at a new 2023 high. It is stalling a bit here at the top of its rising trading channel, and there is a small open gap below that may need some attention. Technically it could pull back all the way to 4150 and remain in that rising channel, but the bulls may try to defend 4200 on any dip. Trading volume has been light so money managers may not be participating, and that means there could be a lot of cash on the sidelines to fuel this rally- IF they eventually buy.
The EFA (I-fund) bottomed last week when the dollar peaked, which is something we might expect, but the dollar has bounced back over the last three trading days while the I-fund has been rallying. I think something is going to have to give here. Either the dollar pulls back while the I-fund challenges the old highs, or the dollar makes new highs and the I-fund may hit the breaks again.
BND (Bonds / F-fund) was up as yields were spilt with the 30-year and very short term bond yields falling while the 10-year was up. Lots of resistance near 73 and an open gap near 72.15 making this a little vulnerable in the short-term.
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 so much 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.
