A Goldilocks jobs report that saw more jobs created than expected but an unemployment rate that climbed, was a recipe for another rally on Friday as investors moved past the debt ceiling concerns and focus back on economic strength and the Fed. The Dow gained 701-points and it was the small caps that led this time, rather than the typical large tech stocks, perhaps suggesting a shift on Wall Street?
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To me, that was a possible tell, or shift. Perhaps it will be just temporary, but if not there may be a lot of reallocating on Wall Street as investors had become very underweighted small caps and the other non-tech large caps.
The Nasdaq 100, which are the largest tech stocks in the Nasdaq Composite was up an impressive 0.73% on Friday, but it actually lagged the broader indices. The S&P 500, which contains most of those same large tech stocks, outperformed because of the strength in other sectors on Friday.
And of course the DWCPF (S-fund) is basically the Wilshire 4500, or all US stocks that are not in the S&P 500, and it blasted out a near 3% gain on the day - pushing above its 200-day EMA for the first time since early March when it crashed below it during the regional bank crisis.
The RSP is the equal Weighted S&P 500. For those who may not know, it is the same 500 stocks that are in the S&P 500, but rather than weighing the larger cap stocks more heavily, all 500 stocks are weighted the same. On Friday, and for the first time in a while, the RSP outperformed the S&P 500. Not only that but technically it broke through important descending resistance line, as well as the 50 and 200-day EMAs. Could it be a fake out? Sure, but as they say, a journey of 1000 miles starts with a single step.
The Dow Transportation Index has been lagging along with the broader market and on Friday it did participate in the rally and broke above the descending resistance line, however it stalled and closed right on the 200-day EMA, so this may have more to prove as it negotiates that resistance.
The weekly chart of the S&P 500 still matters of course and this chart has been making progress, albeit slowly, for months. Last week's candlestick did break through the top of the year long consolidation, and we have seen three prior fake outs so we'll see if the bulls can make it different this time.
The market could certainly flip over at any time. We know of the concerns out there, but the fact that we know, and so many experts and amateurs are predicting the doom and gloom, means there is a lot of money on the sidelines, and cash can be ammunition for a rally. As some of these bears capitulate (give up) they will put their money to work and keep the market buoyant.
This was a headline in the Wall Street Journal over the weekend...
Wall Street Turns Most Bearish on S&P 500 Since ’07
"Hedge funds and other speculators are betting the S&P 500 will decline, while also preparing for a rally in the tech-focused Nasdaq 100."
Sentiment, at extremes, is often a contrarian sign. So, perhaps this market rally has some staying power until we see get enough of these bears to shift sentiment. That could produce what they call a blow-off top. The money managers still seem to favor big tech so maybe that means those stocks are due for a rest?
By the way, our weekly TSP Talk Sentiment Survey, which unlike some sentiment surveys is worded with more of a short-term outlook in mind, brought out the bulls as 58% responding thought stocks would go higher this week - the highest percentage since last March. Only 27% said it would go lower - the lowest since that same week in March. This may be getting extreme but our surveys are much more volatile and triggered more by recent activity.
The S&P 500 (C-fund) made a bold move on Friday culminating a week of good news for the stock market. I was a little surprised that trading volume wasn't higher than it was, and that may be a good thing actually. The bulls would like to see a build up in volume to show more buyers coming in, but often volume spikes - outside of options expiration days - are a sign of a peak (or bottom.) The high volume negative day last Wednesday was likely to due to excess fear that The House was not going to pass the debt ceiling bill. They passed it, and you know the rest.
The DWCPF (S-fund) led the way on Friday and that gain pushed it above some key resistance. The momentum is on the bulls' side and they have been waiting a long time for the small caps to participate, but it wouldn't be out of the question to see some profit taking to push this back to the breakout areas near 1700 and 1680. From there it would be a matter of how much dip buying interest is out there.
The EFA (I-fund) had a big positive reversal day on Wednesday and the two day rally that followed pushed it back above some key moving averages. The dollar was actually up quite a bit on Friday so the rally may have been more impressive than the gains showed.
The question is whether the dollar is peaking, or just getting started on the upside after that weird wide reversal day on Thursday? The Fed is reducing their balance sheet and that is giving the dollar some strength.
BND (Bonds / F-fund) was a victim of the strong economic data on Friday as yields moved higher and investors opted for stocks over bonds.
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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To me, that was a possible tell, or shift. Perhaps it will be just temporary, but if not there may be a lot of reallocating on Wall Street as investors had become very underweighted small caps and the other non-tech large caps.
The Nasdaq 100, which are the largest tech stocks in the Nasdaq Composite was up an impressive 0.73% on Friday, but it actually lagged the broader indices. The S&P 500, which contains most of those same large tech stocks, outperformed because of the strength in other sectors on Friday.
And of course the DWCPF (S-fund) is basically the Wilshire 4500, or all US stocks that are not in the S&P 500, and it blasted out a near 3% gain on the day - pushing above its 200-day EMA for the first time since early March when it crashed below it during the regional bank crisis.
The RSP is the equal Weighted S&P 500. For those who may not know, it is the same 500 stocks that are in the S&P 500, but rather than weighing the larger cap stocks more heavily, all 500 stocks are weighted the same. On Friday, and for the first time in a while, the RSP outperformed the S&P 500. Not only that but technically it broke through important descending resistance line, as well as the 50 and 200-day EMAs. Could it be a fake out? Sure, but as they say, a journey of 1000 miles starts with a single step.
The Dow Transportation Index has been lagging along with the broader market and on Friday it did participate in the rally and broke above the descending resistance line, however it stalled and closed right on the 200-day EMA, so this may have more to prove as it negotiates that resistance.
The weekly chart of the S&P 500 still matters of course and this chart has been making progress, albeit slowly, for months. Last week's candlestick did break through the top of the year long consolidation, and we have seen three prior fake outs so we'll see if the bulls can make it different this time.
The market could certainly flip over at any time. We know of the concerns out there, but the fact that we know, and so many experts and amateurs are predicting the doom and gloom, means there is a lot of money on the sidelines, and cash can be ammunition for a rally. As some of these bears capitulate (give up) they will put their money to work and keep the market buoyant.
This was a headline in the Wall Street Journal over the weekend...
Wall Street Turns Most Bearish on S&P 500 Since ’07
"Hedge funds and other speculators are betting the S&P 500 will decline, while also preparing for a rally in the tech-focused Nasdaq 100."
Sentiment, at extremes, is often a contrarian sign. So, perhaps this market rally has some staying power until we see get enough of these bears to shift sentiment. That could produce what they call a blow-off top. The money managers still seem to favor big tech so maybe that means those stocks are due for a rest?
By the way, our weekly TSP Talk Sentiment Survey, which unlike some sentiment surveys is worded with more of a short-term outlook in mind, brought out the bulls as 58% responding thought stocks would go higher this week - the highest percentage since last March. Only 27% said it would go lower - the lowest since that same week in March. This may be getting extreme but our surveys are much more volatile and triggered more by recent activity.
The S&P 500 (C-fund) made a bold move on Friday culminating a week of good news for the stock market. I was a little surprised that trading volume wasn't higher than it was, and that may be a good thing actually. The bulls would like to see a build up in volume to show more buyers coming in, but often volume spikes - outside of options expiration days - are a sign of a peak (or bottom.) The high volume negative day last Wednesday was likely to due to excess fear that The House was not going to pass the debt ceiling bill. They passed it, and you know the rest.
The DWCPF (S-fund) led the way on Friday and that gain pushed it above some key resistance. The momentum is on the bulls' side and they have been waiting a long time for the small caps to participate, but it wouldn't be out of the question to see some profit taking to push this back to the breakout areas near 1700 and 1680. From there it would be a matter of how much dip buying interest is out there.
The EFA (I-fund) had a big positive reversal day on Wednesday and the two day rally that followed pushed it back above some key moving averages. The dollar was actually up quite a bit on Friday so the rally may have been more impressive than the gains showed.
The question is whether the dollar is peaking, or just getting started on the upside after that weird wide reversal day on Thursday? The Fed is reducing their balance sheet and that is giving the dollar some strength.
BND (Bonds / F-fund) was a victim of the strong economic data on Friday as yields moved higher and investors opted for stocks over bonds.
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.
