Stocks continue to catch a bid and we saw dip buying again after a morning sell off reversed higher of the morning lows. The day was punctuated by a late push higher in the final 15 minutes of trading and the indices inched closer to filling their open gaps from June on the charts. The Dow reversed 500 points from down 340 to up 160, and the S&P turned a 30-point decline into a 39-point rally. The dollar was down, bonds were up, and oil fell $3.50 a barrel.
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After the bell yesterday we saw SNAP getting slaughtered to the tune of a 26% loss after reporting earnings, and we saw many other social media stocks down in sympathy and the futures basically gave up that final 15 minute spike higher giving or about a third of yesterday's the day's gains. However we saw something similar on Wednesday evening into Thursday and that turned out fine for the bulls.
The question is, now that we are starting to see those June 10th open gaps get filled, will the bears come back into the picture, or have the bulls taken over? Seeing a stock like SNAP take a 26% haircut afterhours has to get investors a little nervous heading into the meat of earnings season next week.
About 1/3 of all S&P 500 stocks will report earnings next week including mega-cap companies like Amazon, Microsoft Apple, Alphabet (GOOG) and Meta, aka Facebook. And unless you have been hiding under a rock, you know that the Fed is planning to raise interest rates again next Wednesday, and the economic data probably has not done anything to sway their resolve to go 0.75% or 1.0%.
So to see stocks rallying into this important week is either a suicide mission from the bulls, or they feel that the economic data can't get any worse and the bad news has already been priced in so there's only one way to go now, which is up. That's your decision as we head into next week.
The 10-year Treasury yield posted a nasty negative outside reversal day which pushed it back below 3% and its 50-day EMA. It is also trying to complete a bearish looking head and shoulders pattern for yields, which could have a downside target near 2.4%..
That helped push BND (bonds / F-fund) above its bullish looking flag after a 0.82% gain on the day, and above its 50-day EMA, and since bond prices move counter to yields the inverted head and shoulders pattern actually looks more bullish for bonds.
The price of oil did reverse down after testing the top of its recent descending trading channel. This could confirm the trend of the weakening economy, but of course it should mean gasoline prices could continue to ease, which helps consumers. It is testing the support of the 200-day EMA again and it either bounces back pretty quickly, or oil could be hitting $90 next week.
The Volatility Index was down another 3% and it has been falling steadily since its mid-June peak and it has been under its 200-day EMA for several days now. It may be on a beeline to the 22 area where there is some longer term support coming off the previous lows.
At this point investors have to make a big decision. They have to decide if they think stocks are bottoming making it the time to start accumulating positions if you have some cash on hand. Or should investors who may have made a nice gain in recent days be looking at this as an opportunity to sell a rally in a bear market as the indices fill open gaps and test some overhead resistance?
The S&P 500 (C-fund) stretched above its 50-day EMA and in the final few minutes of trading on Tuesday, nearly filled that open gap. It has now closed above its blue descending trading channel for three straight days and 3 to 5 days is a pretty good confirmation, but the gap is a draw, and the bear flag is still officially intact, although it is losing some credibility the longer it fails to break down, as bear flags tend to do.
The DWCPF (S-fund) is also flying high but right in the thick of a plethora of resistance. Earnings and the Fed should make or break this chart next week if something decisive doesn't happen today.
EFA (I-fund) gained 1% as the dollar resumed its decline off the recent highs. There is still room for the dollar to fall a little more before hitting support so perhaps the EFA will get a chance to test its 50-day EMA above 64. There are a couple of over head gaps on this chart that could ensure that 50-day EMA does get hit.
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. Have a great weekend!
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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After the bell yesterday we saw SNAP getting slaughtered to the tune of a 26% loss after reporting earnings, and we saw many other social media stocks down in sympathy and the futures basically gave up that final 15 minute spike higher giving or about a third of yesterday's the day's gains. However we saw something similar on Wednesday evening into Thursday and that turned out fine for the bulls.
The question is, now that we are starting to see those June 10th open gaps get filled, will the bears come back into the picture, or have the bulls taken over? Seeing a stock like SNAP take a 26% haircut afterhours has to get investors a little nervous heading into the meat of earnings season next week.
About 1/3 of all S&P 500 stocks will report earnings next week including mega-cap companies like Amazon, Microsoft Apple, Alphabet (GOOG) and Meta, aka Facebook. And unless you have been hiding under a rock, you know that the Fed is planning to raise interest rates again next Wednesday, and the economic data probably has not done anything to sway their resolve to go 0.75% or 1.0%.
So to see stocks rallying into this important week is either a suicide mission from the bulls, or they feel that the economic data can't get any worse and the bad news has already been priced in so there's only one way to go now, which is up. That's your decision as we head into next week.
The 10-year Treasury yield posted a nasty negative outside reversal day which pushed it back below 3% and its 50-day EMA. It is also trying to complete a bearish looking head and shoulders pattern for yields, which could have a downside target near 2.4%..
That helped push BND (bonds / F-fund) above its bullish looking flag after a 0.82% gain on the day, and above its 50-day EMA, and since bond prices move counter to yields the inverted head and shoulders pattern actually looks more bullish for bonds.
The price of oil did reverse down after testing the top of its recent descending trading channel. This could confirm the trend of the weakening economy, but of course it should mean gasoline prices could continue to ease, which helps consumers. It is testing the support of the 200-day EMA again and it either bounces back pretty quickly, or oil could be hitting $90 next week.
The Volatility Index was down another 3% and it has been falling steadily since its mid-June peak and it has been under its 200-day EMA for several days now. It may be on a beeline to the 22 area where there is some longer term support coming off the previous lows.
At this point investors have to make a big decision. They have to decide if they think stocks are bottoming making it the time to start accumulating positions if you have some cash on hand. Or should investors who may have made a nice gain in recent days be looking at this as an opportunity to sell a rally in a bear market as the indices fill open gaps and test some overhead resistance?
The S&P 500 (C-fund) stretched above its 50-day EMA and in the final few minutes of trading on Tuesday, nearly filled that open gap. It has now closed above its blue descending trading channel for three straight days and 3 to 5 days is a pretty good confirmation, but the gap is a draw, and the bear flag is still officially intact, although it is losing some credibility the longer it fails to break down, as bear flags tend to do.
The DWCPF (S-fund) is also flying high but right in the thick of a plethora of resistance. Earnings and the Fed should make or break this chart next week if something decisive doesn't happen today.
EFA (I-fund) gained 1% as the dollar resumed its decline off the recent highs. There is still room for the dollar to fall a little more before hitting support so perhaps the EFA will get a chance to test its 50-day EMA above 64. There are a couple of over head gaps on this chart that could ensure that 50-day EMA does get hit.
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. Have a great weekend!
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.
