Stocks bounced back on Friday, recovering some of the earlier weekly losses. The Dow gained 0.65% on the day and it was one of the laggards as small caps and the Nasdaq pounded out gains of over 1%. Bonds were down slightly as yields moved up, and the dollar backed off from a new 2021 high made on Thursday. Oil continued it's slide and is nearing some critical support.
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It's been an emotional ride the last few days and leading into the weekend we were dealing with the situation in Afghanistan, the announcement that the FDA approval for the the Pfizer COVID vaccine is imminent, a hurricane was bearing down on New York, and investors decided it was the day to do some dip buying, and in a big way.
Perhaps these were distractions from the noise that had been worrying investors as August had turned into the month we had been concerned about, and the streak of 6 straight months of gains in the S&P 500 had looked like it might have been in jeopardy.
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Then came Friday. The internals were very strong, although the new high / new lows list is still troublesome so we continue to get Hindenburg Omen warning signs.
Not all Hindenburg Omen warnings trigger crashes, but basically all crashes are preceded by them. You can look up the criteria, but basically it is triggered when we get an unusually high number of new highs, and new lows, on the same day.
The dollar pulled back a little on Friday after making a new high on Thursday. It looks like a solid chart pattern, but we could see a double top pullback before it proceeds higher.
The rally in the dollar recently added to the pressure that we've seen in the price of oil but the dip in the dollar on Friday didn't help it either as it tumbled another 2%. This is potentially a sign that the economy is slowing some, perhaps in response to the Delta variant, but you can see that it is about to challenge the important 200-day moving average, and that could make or break this chart. It is down about 17% from the highs which is a pretty hefty pullback already.
The bounce in the indices is obviously bullish, but not necessarily the end of the pullback, although the S&P 500 chart continues to look very strong. The small caps have a tendency to do some double dipping so don't be too surprised if they back off again, just to keep us on our toes. As you'll see in the index charts below, often the second dip is as good of an opportunity to buy.
I don't know if an FDA approval of Pfizer's vaccine is going to trigger a rally since it wasn't like everyone didn't have an opportunity to get the vaccine already if they wanted it, but perhaps the approval will sway some of those who didn't get, to get it, and the market may like that - I'm not sure.
The S&P 500 (C-fund) bounced back from another minor pullback and, like the one in June, it didn't even tag the 50-day EMA on the way down... not yet anyway. As I mentioned above, sometimes you get a double dip like we saw in May. Bottom line, the trend is up, the dip buyers are buying very pullback to the 20-day average, and if that's taken out, then they double down on the 50-day. The PMO indicator below the S&P chart is still quite negative, and with some internal weakness over the last few weeks, there could be some trouble brewing.
The weekly chart shows no signs of cracking yet, and even a move lower down to 4300 may not hurt this rising trend. It's a tough trend to fight, but once it does break it could be swift as support gets very thin below 4300, so don't et too complacent. The 50-week average is below 4000.
The DWCPF (S-fund) seems to have put in a low last Thursday, but as I mentioned above, this small caps chart does have a tendency to double dip the lows so if you feel like you missed an opportunity late lat week, you could get another chance this week.
The EFA (EAFE Index / I-fund) was up 0.39%, and I'm not sure why the I-fund came in with a loss. The dollar was down and that should have helped, but instead the I-fund was given a 0.07% loss. Thursday's price wasn't too out of whack that they would have made an adjustment, so my guess is the I-fund will get a good price on Monday - not necessarily up, but a better than the EFA.
The Dow Transportation Index has pulled back from its recent rally and seems to be in a do or die situation after falling back below the 50-day (purple) and 100-day (orange) EMAs. There seems to be decent support near 14,400, but tough resistance just below 14,800. Those are the areas that could determine which direction the next big move will go.
The BND (bonds / F-fund) was just south of flat on Friday and it really looks like the top of that rising channel is trying to hold as support now. Well, it held in 3 of the last 5 days, and on the other two the top of that resistance line was resistance last week, so it is a meaningful line. If 86.50 doesn't hold then there are a lot more options including another test of the 50-day average, or worse. If 86.50 does hold, then bonds remain bullish.
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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It's been an emotional ride the last few days and leading into the weekend we were dealing with the situation in Afghanistan, the announcement that the FDA approval for the the Pfizer COVID vaccine is imminent, a hurricane was bearing down on New York, and investors decided it was the day to do some dip buying, and in a big way.
Perhaps these were distractions from the noise that had been worrying investors as August had turned into the month we had been concerned about, and the streak of 6 straight months of gains in the S&P 500 had looked like it might have been in jeopardy.
This is the average return by month going back to 1985 (through Thursday's close) and we can see that August and September tend to be the trouble spot for stocks during the year. October is surprising positive, but it can be very volatile.
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Then came Friday. The internals were very strong, although the new high / new lows list is still troublesome so we continue to get Hindenburg Omen warning signs.
Not all Hindenburg Omen warnings trigger crashes, but basically all crashes are preceded by them. You can look up the criteria, but basically it is triggered when we get an unusually high number of new highs, and new lows, on the same day.
The dollar pulled back a little on Friday after making a new high on Thursday. It looks like a solid chart pattern, but we could see a double top pullback before it proceeds higher.
The rally in the dollar recently added to the pressure that we've seen in the price of oil but the dip in the dollar on Friday didn't help it either as it tumbled another 2%. This is potentially a sign that the economy is slowing some, perhaps in response to the Delta variant, but you can see that it is about to challenge the important 200-day moving average, and that could make or break this chart. It is down about 17% from the highs which is a pretty hefty pullback already.
The bounce in the indices is obviously bullish, but not necessarily the end of the pullback, although the S&P 500 chart continues to look very strong. The small caps have a tendency to do some double dipping so don't be too surprised if they back off again, just to keep us on our toes. As you'll see in the index charts below, often the second dip is as good of an opportunity to buy.
I don't know if an FDA approval of Pfizer's vaccine is going to trigger a rally since it wasn't like everyone didn't have an opportunity to get the vaccine already if they wanted it, but perhaps the approval will sway some of those who didn't get, to get it, and the market may like that - I'm not sure.
The S&P 500 (C-fund) bounced back from another minor pullback and, like the one in June, it didn't even tag the 50-day EMA on the way down... not yet anyway. As I mentioned above, sometimes you get a double dip like we saw in May. Bottom line, the trend is up, the dip buyers are buying very pullback to the 20-day average, and if that's taken out, then they double down on the 50-day. The PMO indicator below the S&P chart is still quite negative, and with some internal weakness over the last few weeks, there could be some trouble brewing.
The weekly chart shows no signs of cracking yet, and even a move lower down to 4300 may not hurt this rising trend. It's a tough trend to fight, but once it does break it could be swift as support gets very thin below 4300, so don't et too complacent. The 50-week average is below 4000.
The DWCPF (S-fund) seems to have put in a low last Thursday, but as I mentioned above, this small caps chart does have a tendency to double dip the lows so if you feel like you missed an opportunity late lat week, you could get another chance this week.
The EFA (EAFE Index / I-fund) was up 0.39%, and I'm not sure why the I-fund came in with a loss. The dollar was down and that should have helped, but instead the I-fund was given a 0.07% loss. Thursday's price wasn't too out of whack that they would have made an adjustment, so my guess is the I-fund will get a good price on Monday - not necessarily up, but a better than the EFA.
The Dow Transportation Index has pulled back from its recent rally and seems to be in a do or die situation after falling back below the 50-day (purple) and 100-day (orange) EMAs. There seems to be decent support near 14,400, but tough resistance just below 14,800. Those are the areas that could determine which direction the next big move will go.
The BND (bonds / F-fund) was just south of flat on Friday and it really looks like the top of that rising channel is trying to hold as support now. Well, it held in 3 of the last 5 days, and on the other two the top of that resistance line was resistance last week, so it is a meaningful line. If 86.50 doesn't hold then there are a lot more options including another test of the 50-day average, or worse. If 86.50 does hold, then bonds remain bullish.
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.
