Stocks recovered most, if not all, of Friday's losses yesterday as the Dow jumped 587-points, and we saw significant gains in most of the broader indices. The market was perhaps in need of a pullback off the recent highs, but was that it? We also saw small caps surge, and commodities rally back as the dollar rolled over from last week's spike higher. Bonds were down with yields pushing slightly higher.
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Markets can be a funny thing. Whatever was bugging the market late last week, wasn't bothering it on Monday so we saw some schizophrenic action. The question is, which way was the right way?
Perhaps it was all just part of the expiration Friday with a push to move the indies to a certain level at the close on Friday, and once the options and futures contracts expired at Friday's close, that pressure was no longer there. That's just speculation, but certainly there are games like that played all the time.
Many bulls believe last week's gains will be recovered quickly this week, and that could be the case, but it was a fairly steep decline and sometimes there is some backing and filling after a rally coming off of a sharp decline drop like we saw last week - the proverbial dead cat bounce. Traders and investors who regretted not selling highs last week before the drop, may see it as a second opportunity if we see the indices heading back that way. yesterday the internal numbers virtually reversed that of Friday's. Advancing volume was almost 5 to 1 over declining on the NYSE, and on the Nasdaq it was a more moderate 2 to 1.
The dollar rolled over again so the Fed driven rally that pushed UUP back above its 200-day EMA for the first time since late March, could also do some backing and filling in the coming days. The open gaps below, one which was filled yesterday, could be downside targets. As goes the dollar recently, so goes stocks and commodities -- in the opposite direction.
The yield on the 10-year Treasury rallied back slightly from last Thursday and Friday's big sell off. Of course bond prices and the F-fund move counter to yields so they were down yesterday.
I think rally on Monday and / or Tuesday was going to happen whether or not we have seen the lows for the pullback. But it's what happens after the snap-back rally that will be more telling.
We did see a Dow Theory sell signal yesterday, and while I don't tend to follow that, I know there are a lot of investors who do, and that can be a self-fulfilling prophesy.
According to sentimenTrader,com, historically after a Dow Theory Sell signal, the Dow was up three months later only 34% of the time. There were 47 signals going back to 1900.
The S&P 500 (C-fund) bounced off the 50-day EMA again on Monday. That has been pretty consistence in 2021, but we have seen a few retests after the first push off it -- most recently in May, and we also saw it in February and March. The 4200 - 4260 area has been tough overhead resistance of late. With the index closing at 4225 yesterday, there's some wiggle room in both directions with the bottom of that trading channel being near 4100.
The DWCPF (S-fund) had a big day gaining 1.5% yesterday. I drew in several support and resistance lines on the chart and you can see the support lines did a good job of holding during last week's decline. There's some rising resistance (orange) coming off the May lows which came in to play near yesterdays highs.
The EFA (I-fund) has been like a broken record in recent months. It pulls back to the 50-day EMA, and rallies up to the red rising resistance line. Of course that can't last forever, but short term traders will likely keep playing it until it stops working. There's a couple of open gaps that could be possible upside targets.
The Dow Transportation Index rallied 2% yesterday after a sharp pullback in June. The 100-day EMA has acted as good support going back to the middle of 2020. Is it going to be that easy again?
BND (bonds / F-fund) was down and it is hanging right in the middle of its current rising trading channel. The trend is up.
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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Markets can be a funny thing. Whatever was bugging the market late last week, wasn't bothering it on Monday so we saw some schizophrenic action. The question is, which way was the right way?
Perhaps it was all just part of the expiration Friday with a push to move the indies to a certain level at the close on Friday, and once the options and futures contracts expired at Friday's close, that pressure was no longer there. That's just speculation, but certainly there are games like that played all the time.
Many bulls believe last week's gains will be recovered quickly this week, and that could be the case, but it was a fairly steep decline and sometimes there is some backing and filling after a rally coming off of a sharp decline drop like we saw last week - the proverbial dead cat bounce. Traders and investors who regretted not selling highs last week before the drop, may see it as a second opportunity if we see the indices heading back that way. yesterday the internal numbers virtually reversed that of Friday's. Advancing volume was almost 5 to 1 over declining on the NYSE, and on the Nasdaq it was a more moderate 2 to 1.
The dollar rolled over again so the Fed driven rally that pushed UUP back above its 200-day EMA for the first time since late March, could also do some backing and filling in the coming days. The open gaps below, one which was filled yesterday, could be downside targets. As goes the dollar recently, so goes stocks and commodities -- in the opposite direction.
The yield on the 10-year Treasury rallied back slightly from last Thursday and Friday's big sell off. Of course bond prices and the F-fund move counter to yields so they were down yesterday.
I think rally on Monday and / or Tuesday was going to happen whether or not we have seen the lows for the pullback. But it's what happens after the snap-back rally that will be more telling.
We did see a Dow Theory sell signal yesterday, and while I don't tend to follow that, I know there are a lot of investors who do, and that can be a self-fulfilling prophesy.
According to sentimenTrader,com, historically after a Dow Theory Sell signal, the Dow was up three months later only 34% of the time. There were 47 signals going back to 1900.
The S&P 500 (C-fund) bounced off the 50-day EMA again on Monday. That has been pretty consistence in 2021, but we have seen a few retests after the first push off it -- most recently in May, and we also saw it in February and March. The 4200 - 4260 area has been tough overhead resistance of late. With the index closing at 4225 yesterday, there's some wiggle room in both directions with the bottom of that trading channel being near 4100.
The DWCPF (S-fund) had a big day gaining 1.5% yesterday. I drew in several support and resistance lines on the chart and you can see the support lines did a good job of holding during last week's decline. There's some rising resistance (orange) coming off the May lows which came in to play near yesterdays highs.
The EFA (I-fund) has been like a broken record in recent months. It pulls back to the 50-day EMA, and rallies up to the red rising resistance line. Of course that can't last forever, but short term traders will likely keep playing it until it stops working. There's a couple of open gaps that could be possible upside targets.
The Dow Transportation Index rallied 2% yesterday after a sharp pullback in June. The 100-day EMA has acted as good support going back to the middle of 2020. Is it going to be that easy again?
BND (bonds / F-fund) was down and it is hanging right in the middle of its current rising trading channel. The trend is up.
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.
