The busy week starts off with a sell off in stocks led on the downside by tech stocks as the Nasdaq posted a 2% loss. The Dow lost 261-point. The S&P 500 (C) and DWCPF (S) both fell more than 1%, and the EFA (I) held up better despite a decent rally in the dollar. Bonds were down as yields moved up.
[TABLE="align: center"]
[TR]
[TD="align: center"]
[/TD]
[TD]
[/TD]
[TD="width: 338, align: center"] Daily TSP Funds Return
[TABLE="align: center"]
[TR]
[TD="align: right"][/TD]
[/TR]
[/TABLE]
[/TD]
[/TR]
[/TABLE]
First things first. I had the day wrong initially for the FOMC meeting. It starts today (Tuesday) and tomorrow (Wednesday) will be the interest rate decision and press conference. I had said it was Wednesday and Thursday.
Earnings from Amazon and Apple come out after the bell on February 2nd and if the charts are giving us any clues, you would have to say these look like they are hitting resistance and want to go lower. Of course resistance, if broken, gives us a breakout and opens the door to even higher prices, so clearly the reaction to this week's earnings from these market leaders will be telling.
The dollar was up and it continues to grind in a tight range near recent lows, which generally helps the I-fund, but the question is which way this range breaks. It looks like a bearish flag formation, but the positive reversal on January 18th has been a firm low for a couple of weeks.
The direction of the breakout in that UUP chart will help determine the way the EFA (I-fund) breaks. The two don't always move in opposite directions but a stronger dollar does tend to hold back the I-fund in comparison the the C and S funds.
The Dow Transportation Index pulled back sharply yesterday but it keeps churning inside the right shoulder of its inverted head and shoulders pattern. It could continue its consolidation, but you have to think that the Fed will determine which way this will break. Inverted head and shoulders patterns tend to break to the upside, but sometimes they pull back to retest the middle of the head first, so the short term is still in question, while the longer term seems to be leaning to the bullish side.
We get the January jobs report on Friday and estimates are looking for a gain of about 190,000 jobs and an unemployment rate of 3.6%. By comparison, the December numbers were +223,000 and 3.5% respectively.
The S&P 500 (C-fund) fell below that rising wedge formation and looks like it may be coming back to test the 200-day moving averages, after pulling back from that triple top. Because of the consolidation over the last few months, there is a lot of support underneath the S&P 500. From 3930, to 3956, and 3992 there are all kinds of crossing support lines. Not that the Fed's action couldn't push this below all of that, but if that happens I think we'll have a clear idea that this rally is over. Otherwise, any downside that holds at those support levels would probably be giving us a good risk / reward buying opportunity. But if we see 3900 or lower however, look out below.
The DWCPF (S-fund) has closed above its 200-day EMA for six straight days. That's pretty good action in a bear market, if we can still call it that. 1700 looks like a line in the sand where the bulls would want to see a pullback from a breakout above an inverted head and shoulders, hold. Otherwise, 1650's will be back in the picture.
BND (bonds / F-fund) is also holding above a prior breakout area where it has been consolidating for the last couple of weeks. This isn't bad action but I would say that 73 has to hold on any further downside, or this fund will step over the precipice.
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.
[TABLE="align: center"]
[TR]
[TD="align: center"]
[TD]
[/TD]
[TD="width: 338, align: center"] Daily TSP Funds Return
[TR]
[TD="align: right"][/TD]
[/TR]
[/TABLE]
[/TD]
[/TR]
[/TABLE]
First things first. I had the day wrong initially for the FOMC meeting. It starts today (Tuesday) and tomorrow (Wednesday) will be the interest rate decision and press conference. I had said it was Wednesday and Thursday.
Earnings from Amazon and Apple come out after the bell on February 2nd and if the charts are giving us any clues, you would have to say these look like they are hitting resistance and want to go lower. Of course resistance, if broken, gives us a breakout and opens the door to even higher prices, so clearly the reaction to this week's earnings from these market leaders will be telling.
The dollar was up and it continues to grind in a tight range near recent lows, which generally helps the I-fund, but the question is which way this range breaks. It looks like a bearish flag formation, but the positive reversal on January 18th has been a firm low for a couple of weeks.
The direction of the breakout in that UUP chart will help determine the way the EFA (I-fund) breaks. The two don't always move in opposite directions but a stronger dollar does tend to hold back the I-fund in comparison the the C and S funds.
The Dow Transportation Index pulled back sharply yesterday but it keeps churning inside the right shoulder of its inverted head and shoulders pattern. It could continue its consolidation, but you have to think that the Fed will determine which way this will break. Inverted head and shoulders patterns tend to break to the upside, but sometimes they pull back to retest the middle of the head first, so the short term is still in question, while the longer term seems to be leaning to the bullish side.
We get the January jobs report on Friday and estimates are looking for a gain of about 190,000 jobs and an unemployment rate of 3.6%. By comparison, the December numbers were +223,000 and 3.5% respectively.
The S&P 500 (C-fund) fell below that rising wedge formation and looks like it may be coming back to test the 200-day moving averages, after pulling back from that triple top. Because of the consolidation over the last few months, there is a lot of support underneath the S&P 500. From 3930, to 3956, and 3992 there are all kinds of crossing support lines. Not that the Fed's action couldn't push this below all of that, but if that happens I think we'll have a clear idea that this rally is over. Otherwise, any downside that holds at those support levels would probably be giving us a good risk / reward buying opportunity. But if we see 3900 or lower however, look out below.
The DWCPF (S-fund) has closed above its 200-day EMA for six straight days. That's pretty good action in a bear market, if we can still call it that. 1700 looks like a line in the sand where the bulls would want to see a pullback from a breakout above an inverted head and shoulders, hold. Otherwise, 1650's will be back in the picture.
BND (bonds / F-fund) is also holding above a prior breakout area where it has been consolidating for the last couple of weeks. This isn't bad action but I would say that 73 has to hold on any further downside, or this fund will step over the precipice.
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.
