Stocks faded late on quadruple witching Friday to end a good week for the market on a sour note. The Dow lost 209-points while the Nasdaq held onto a small gain to cement in its 6th consecutive positive day. The TSP stocks funds each saw moderate losses after giving up big early gains. Bonds were flat.
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After surging at the open we saw a slow decline the rest of the morning before some news came out from Apple about closing some of its stores, and that triggered a selling program, and from there the indices struggled into the close.
It wasn't a quiet quadruple witching expiration day, as I had suggested in Friday's commentary...
"You would think that would trigger some volatility but there should be an effort to keep things quiet and the S&P 500 as close to 3100 as possible."
... but the S&P 500 did get pushed near that ideal expiration area, closing at 3098.
However the wide swings seemed to be designed to hit stop orders both above and below obvious levels of support and resistance before setting near 3100, causing the volatility.
Perhaps it's the increase in COVID cases, or perhaps last Thursday's 1800-point sell-off changed investor sentiment, but the indices have been acting a little tired since that decline, so today could be an interesting tell.
Being a major expiration day for options and futures contracts, Friday may not have told the true story about where the market may want to go, but today could. The Trump rally on Saturday could have been a positive catalyst for stocks as he cheered the stock market and the recent rebound in the economy, but the media is focused on the rise in the coronavirus cases again, and that will certainly have an impact on economic activity. So, as I sit and wait to see how the futures open up on Sunday evening, it's a guessing game. The futures plummeted on Friday after the close and based on the weekend Wall Street indicators, it looks like it will be a negative start to the week, but you never know because we saw how quickly that can change last Monday, if you remember.
Historically pre-expirations weeks have a better record than post-expirations weeks, so the bears may come in with an advantage this week, but the push off the March lows has been so explosive that it's tough to dismiss the bulls' ability to keep swat away the bears.
Chart provided courtesy of www.sentimentrader.com
The S&P 500 (C-fund) traded in a fairly wide range on Friday, and as I mentioned, it felt like "they" - whether we call them smart money traders, professionals, big money who can move (and manipulate) the market, went after stop orders creating that wide range, but it closed right about where we expected it to, based on the strike prices of options and futures contracts. It is still below one level of broken support (blue dashed) and above the rising trading channel (red.) The drop dead support levels for the bull market appear to be the 50 and 200-day EMAs. Below that, and support gets very thin.
The DWCPF (S-fund) was down modestly on Friday but for the week it bounced back nicely from the prior Thursday's major sell-off. It remains in the rising trading channel (blue) and that looks like a small bull flag forming above the 200-day EMA.
The EFA (I-fund) hit the 200-day Simple average (orange) again on Friday, and failed again, so that has been stubborn resistance since the breakdown a couple of weeks ago. The trend is still clearly up, but there are a couple of cracks here that it will have to deal with in the short-term.
The Dow Transportation Index is also trading back below its 200-day EMA and has been since that infamous Thursday sell-off. It remains below the 200-day EMA, which is a warning, but above the 50-day EMA and in the rising trading channel and it doesn't look all that bad although there are some key support areas that need to hold. A drop below 8800 to 8750 would be concerning.
The price of oil continued to move higher last week and it is nearing some important resistance at the 200-day EMA and the prior high. If the COVID 2nd wave is an issue, we could see the oil market rollover here, but it it doesn't, that could be a good sign that demand is rising and the economy is still growing.
BND (bonds / F-fund) was up slightly on Friday and remains above some key support and bonds have surprisingly held a bid despite the stock market's continued rally.
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
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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After surging at the open we saw a slow decline the rest of the morning before some news came out from Apple about closing some of its stores, and that triggered a selling program, and from there the indices struggled into the close.
It wasn't a quiet quadruple witching expiration day, as I had suggested in Friday's commentary...
"You would think that would trigger some volatility but there should be an effort to keep things quiet and the S&P 500 as close to 3100 as possible."
... but the S&P 500 did get pushed near that ideal expiration area, closing at 3098.
However the wide swings seemed to be designed to hit stop orders both above and below obvious levels of support and resistance before setting near 3100, causing the volatility.
Perhaps it's the increase in COVID cases, or perhaps last Thursday's 1800-point sell-off changed investor sentiment, but the indices have been acting a little tired since that decline, so today could be an interesting tell.
Being a major expiration day for options and futures contracts, Friday may not have told the true story about where the market may want to go, but today could. The Trump rally on Saturday could have been a positive catalyst for stocks as he cheered the stock market and the recent rebound in the economy, but the media is focused on the rise in the coronavirus cases again, and that will certainly have an impact on economic activity. So, as I sit and wait to see how the futures open up on Sunday evening, it's a guessing game. The futures plummeted on Friday after the close and based on the weekend Wall Street indicators, it looks like it will be a negative start to the week, but you never know because we saw how quickly that can change last Monday, if you remember.
Historically pre-expirations weeks have a better record than post-expirations weeks, so the bears may come in with an advantage this week, but the push off the March lows has been so explosive that it's tough to dismiss the bulls' ability to keep swat away the bears.
Chart provided courtesy of www.sentimentrader.com
The S&P 500 (C-fund) traded in a fairly wide range on Friday, and as I mentioned, it felt like "they" - whether we call them smart money traders, professionals, big money who can move (and manipulate) the market, went after stop orders creating that wide range, but it closed right about where we expected it to, based on the strike prices of options and futures contracts. It is still below one level of broken support (blue dashed) and above the rising trading channel (red.) The drop dead support levels for the bull market appear to be the 50 and 200-day EMAs. Below that, and support gets very thin.
The DWCPF (S-fund) was down modestly on Friday but for the week it bounced back nicely from the prior Thursday's major sell-off. It remains in the rising trading channel (blue) and that looks like a small bull flag forming above the 200-day EMA.
The EFA (I-fund) hit the 200-day Simple average (orange) again on Friday, and failed again, so that has been stubborn resistance since the breakdown a couple of weeks ago. The trend is still clearly up, but there are a couple of cracks here that it will have to deal with in the short-term.
The Dow Transportation Index is also trading back below its 200-day EMA and has been since that infamous Thursday sell-off. It remains below the 200-day EMA, which is a warning, but above the 50-day EMA and in the rising trading channel and it doesn't look all that bad although there are some key support areas that need to hold. A drop below 8800 to 8750 would be concerning.
The price of oil continued to move higher last week and it is nearing some important resistance at the 200-day EMA and the prior high. If the COVID 2nd wave is an issue, we could see the oil market rollover here, but it it doesn't, that could be a good sign that demand is rising and the economy is still growing.
BND (bonds / F-fund) was up slightly on Friday and remains above some key support and bonds have surprisingly held a bid despite the stock market's continued rally.
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
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.
