Stocks opened higher on Friday, then kept going. And more important than the gains was the move off of key support that was on many of the charts that we follow. The Dow gained 387-points and we saw gains of 1% to 2% in many indices. Yields and the dollar were down sharply, and the two of them have been playing a back and forth ping pong game lately, and the stock market has been trying to keep up with what is really happening. That said, the stocks and bond markets are usually looking forward and we may not even be aware of what is actually causing this bullish action right now.
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The internal numbers confirmed the strength with advance / decline ratios of 4, 5, and even as much as 7 to 1 in favor of the advancing issues and trading volume over declining.
The action certainly looks encouraging for the bulls, but today could be tricky. We've seen some fake outs, like the one in December where the breakout off the lows didn't last long and in fact quickly led to lower lows. Then, in early January we saw a similar Friday breakout from a consolidation, but the following Monday saw a major negative reversal. Now that one may have caused some panic selling when all of the big early Monday gains were lost, and then the following day the rally resumed. As I always say, "they", whoever they are, love to try to get us leaning the wrong way. Friday's bullish action probably will have mom and pop leaning on the bullish side to start the day, so will "they" do something to try to change that?
Yields and the dollar fell sharply on Friday and it may turn out that Thursday's unusual upside breakout from an F-flag on the 10-year yield, which tend to break down, was a fake out, and now being back in the flag, will it do what it is "supposed" to do and break down?
The UUP dollar ETF chart chart has alternated between closing below and above the 200-day moving average for 7 straight days. A move back above today would probably turn the stock market back down, but if this can show signs of remaining below that average, we could get a sustained rally in stocks
We'll get to the daily charts down below, but taking a look at the longer-term weekly charts shows very good technical action in the S&P 500, small caps, and the Nasdaq. The 40-week moving average held as support for a second straight week on the S&P, and the old resistance line has continued to hold as support since the breakout.
These are great developments from a technical perspective. Why the market would act this bullish, I don't know. But there's a lot I don't know, and that's why I generally rely on the charts, price action, and indicators to help me decipher what the heck is going on. If investors wait for the news about why stocks have been doing well, they could miss the rally.
On Friday we will get the February jobs report. Estimates are looking for a gain of just over 200,000 jobs, which would be solid gains, but if you recall we are coming off that outlier January report where there were 517,000 new jobs reported. The unemployment rate is expected to remain at 3.4%.
The S&P 500 (C-fund) was up sharply on Friday and shot back above all three of the major moving averages, while recapturing the important 4000 level. There is now some room to run on the upside, but there will be more resistance near about 4080, where the descending resistance line of the peak will meet the top of that open gap from mid-February.
The DWCPF (S-fund) is nearing resistance after its big rally on Friday, but that is a bull flag and there's always a possibility that it will crack that resistance and break to the upside. This chart is acting remarkably well as far as following textbook chart pattern scripts. We saw an inverted head and shoulders pattern break to the upside. It created a bull flag in the process and held at the top of the head and shoulder pattern. Now techies would expect the flag to breakout.
The EFA (I-fund) is also in a bullish flag after a long pulling back from the peak. It has so far successfully retested that breakout area just below 69. This looks quite good, but it could always come back down into the flag before breaking out. There is an open gap near 70 that was opened on Friday, so that's also a potential target if there is no break out.
BND (bonds / F-fund) was up big on Friday and recaptured the neckline of the head and shoulders pattern, after a day below it. I am expecting this to form some kind of a right shoulder before any breakdown as bonds have gotten quite oversold during the February decline.
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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The internal numbers confirmed the strength with advance / decline ratios of 4, 5, and even as much as 7 to 1 in favor of the advancing issues and trading volume over declining.
The action certainly looks encouraging for the bulls, but today could be tricky. We've seen some fake outs, like the one in December where the breakout off the lows didn't last long and in fact quickly led to lower lows. Then, in early January we saw a similar Friday breakout from a consolidation, but the following Monday saw a major negative reversal. Now that one may have caused some panic selling when all of the big early Monday gains were lost, and then the following day the rally resumed. As I always say, "they", whoever they are, love to try to get us leaning the wrong way. Friday's bullish action probably will have mom and pop leaning on the bullish side to start the day, so will "they" do something to try to change that?
Yields and the dollar fell sharply on Friday and it may turn out that Thursday's unusual upside breakout from an F-flag on the 10-year yield, which tend to break down, was a fake out, and now being back in the flag, will it do what it is "supposed" to do and break down?
The UUP dollar ETF chart chart has alternated between closing below and above the 200-day moving average for 7 straight days. A move back above today would probably turn the stock market back down, but if this can show signs of remaining below that average, we could get a sustained rally in stocks
We'll get to the daily charts down below, but taking a look at the longer-term weekly charts shows very good technical action in the S&P 500, small caps, and the Nasdaq. The 40-week moving average held as support for a second straight week on the S&P, and the old resistance line has continued to hold as support since the breakout.
These are great developments from a technical perspective. Why the market would act this bullish, I don't know. But there's a lot I don't know, and that's why I generally rely on the charts, price action, and indicators to help me decipher what the heck is going on. If investors wait for the news about why stocks have been doing well, they could miss the rally.
On Friday we will get the February jobs report. Estimates are looking for a gain of just over 200,000 jobs, which would be solid gains, but if you recall we are coming off that outlier January report where there were 517,000 new jobs reported. The unemployment rate is expected to remain at 3.4%.
The S&P 500 (C-fund) was up sharply on Friday and shot back above all three of the major moving averages, while recapturing the important 4000 level. There is now some room to run on the upside, but there will be more resistance near about 4080, where the descending resistance line of the peak will meet the top of that open gap from mid-February.
The DWCPF (S-fund) is nearing resistance after its big rally on Friday, but that is a bull flag and there's always a possibility that it will crack that resistance and break to the upside. This chart is acting remarkably well as far as following textbook chart pattern scripts. We saw an inverted head and shoulders pattern break to the upside. It created a bull flag in the process and held at the top of the head and shoulder pattern. Now techies would expect the flag to breakout.
The EFA (I-fund) is also in a bullish flag after a long pulling back from the peak. It has so far successfully retested that breakout area just below 69. This looks quite good, but it could always come back down into the flag before breaking out. There is an open gap near 70 that was opened on Friday, so that's also a potential target if there is no break out.
BND (bonds / F-fund) was up big on Friday and recaptured the neckline of the head and shoulders pattern, after a day below it. I am expecting this to form some kind of a right shoulder before any breakdown as bonds have gotten quite oversold during the February decline.
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.
