It's been a short but busy week for the stock market. Stocks opened higher yesterday, chopped around for a while, then closed strong and near the highs of the day. They did that despite some stronger than expected employment data which sent yields and the dollar higher - something that has been holding the stock market back recently. The Dow gained 202-points and the Nasdaq led with a 1.35% gain thanks to big tech. Small caps and the I-fund also had a good day while bonds were down slightly with yields up.
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Near the end of 2023 the talk on Wall Street was about all of the favorable breadth thrust signals we were getting, which basically meant many more stocks were going up than going down each day, to a degree that almost always led to bullish activity in the future.
Here's something that was posted on 12/28 of last year from sentimenTrader.com:
Going back to the mid-1970's, here is what happened to the S&P 500 after this type of activity with median returns and percentage of time positive for various timeframes:
Chart provided courtesy of www.sentimentrader.com
But then stocks started to wobble in January and investors started to get concerned and, while not completely pessimistic, some were calling for a major top.
That could still be the case but the charts are starting to look better with key support holding so the bears may have to pause and reassess the situation before pushing more on the downside.
The recent rally in bond yields and the dollar has been a bearish catalyst for the stock market. If that continues perhaps the breadth thrusts were fake outs, but it isn't uncommon for breadth thrusts to push the market to short term overbought conditions that are in need of consolidation, and / or a pullback.
That's where we find ourselves now as we have had a pullback, mostly in small caps and the broader market indices, but yesterday's rally off of support may put the ball back in the bulls' court, and the bears may have to back off and see how this plays out before getting more aggressive.
The 10-year Treasury Yield and the dollar advanced yesterday, making the rally in stocks that much more impressive. I don't know if this new upward trend in these charts is going to continue, but it could be tough for stocks to rally if it does.
One of the market leaders, the Dow Transportation Index, is trying to break above its bullish looking flag, after holding at the December lows earlier in the week. It also recaptured its 50-day EMA.
Yesterday I discussed Japan and Hong Kong's stock markets. One of our members informed me that Hong Kong is no longer a part of the I-fund. I was unaware of that and the tsp.gov website still shows Hong Kong as making up 3% of the I-fund, but that page was last updated at the end of 2022 so perhaps it has changed. It would be nice if the information was up to date so I'd know what I'm talking about.
The S&P 500 (C-fund) has done a good job of consolidating while remaining above the 20-day EMA, and in the process it looks like it has formed a bullish cup and handle formation. Now it just needs to break out to new highs to finish the job. There could be more resistance at the old highs and maybe a test of the 50-day EMA is needed, but as it is, the chart looks pretty good.
DWCPF (S-fund) has been hit hard this year and yesterday's moderate bounce off support and the 50-day EMA was what the bulls needed. It's not out of the woods yet but if that bull flag does it's job, it could be over 1900 in a day or two. A failure here would be tough on the bulls.
EFA (I-fund) had a nice day despite the move higher in the dollar. It filled one small open gap (blue box) and may have its eye on the red gap up near 75. Finding support and bouncing at the 50-day EMA (purple) was a good sign.
BND (F-fund) was down yesterday after yields moved higher on the stronger than expected employment data. However, this is also in a bullish looking flag and as long as it remains above about 72, the chart seems to be trying to tell us that a break to the upside of the flag is getting very possible.
Thanks so much for reading! Have a great weekend!
Tom Crowley
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
Daily Market Commentary Archives
To get weekly or daily notifications when we post new commentary, sign up HERE.
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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Near the end of 2023 the talk on Wall Street was about all of the favorable breadth thrust signals we were getting, which basically meant many more stocks were going up than going down each day, to a degree that almost always led to bullish activity in the future.
Here's something that was posted on 12/28 of last year from sentimenTrader.com:
| Spikes in the McClellan Summation Index, more often than not, suggest a powerful breadth thrust Breadth thrusts typically signal the type of momentum that can follow through for up to a year Both the S&P 500 and Nasdaq 100 indexes experienced an important reading from their respective McClellan Summation Indexes on 2023-12-28. S&P 500 McClellan Summation Index spikes The S&P 500 McClellan Summation Index is calculated by adding each day's S&P 500 McClellan Oscillator value to the index. The chart below highlights all dates when the S&P 500 McClellan Summation Index crossed above 1,000 for the first time in six months. The latest signal occurred on 2023-12-28." |
Going back to the mid-1970's, here is what happened to the S&P 500 after this type of activity with median returns and percentage of time positive for various timeframes:
Chart provided courtesy of www.sentimentrader.com
But then stocks started to wobble in January and investors started to get concerned and, while not completely pessimistic, some were calling for a major top.
That could still be the case but the charts are starting to look better with key support holding so the bears may have to pause and reassess the situation before pushing more on the downside.
The recent rally in bond yields and the dollar has been a bearish catalyst for the stock market. If that continues perhaps the breadth thrusts were fake outs, but it isn't uncommon for breadth thrusts to push the market to short term overbought conditions that are in need of consolidation, and / or a pullback.
That's where we find ourselves now as we have had a pullback, mostly in small caps and the broader market indices, but yesterday's rally off of support may put the ball back in the bulls' court, and the bears may have to back off and see how this plays out before getting more aggressive.
The 10-year Treasury Yield and the dollar advanced yesterday, making the rally in stocks that much more impressive. I don't know if this new upward trend in these charts is going to continue, but it could be tough for stocks to rally if it does.
One of the market leaders, the Dow Transportation Index, is trying to break above its bullish looking flag, after holding at the December lows earlier in the week. It also recaptured its 50-day EMA.
Yesterday I discussed Japan and Hong Kong's stock markets. One of our members informed me that Hong Kong is no longer a part of the I-fund. I was unaware of that and the tsp.gov website still shows Hong Kong as making up 3% of the I-fund, but that page was last updated at the end of 2022 so perhaps it has changed. It would be nice if the information was up to date so I'd know what I'm talking about.
The S&P 500 (C-fund) has done a good job of consolidating while remaining above the 20-day EMA, and in the process it looks like it has formed a bullish cup and handle formation. Now it just needs to break out to new highs to finish the job. There could be more resistance at the old highs and maybe a test of the 50-day EMA is needed, but as it is, the chart looks pretty good.
DWCPF (S-fund) has been hit hard this year and yesterday's moderate bounce off support and the 50-day EMA was what the bulls needed. It's not out of the woods yet but if that bull flag does it's job, it could be over 1900 in a day or two. A failure here would be tough on the bulls.
EFA (I-fund) had a nice day despite the move higher in the dollar. It filled one small open gap (blue box) and may have its eye on the red gap up near 75. Finding support and bouncing at the 50-day EMA (purple) was a good sign.
BND (F-fund) was down yesterday after yields moved higher on the stronger than expected employment data. However, this is also in a bullish looking flag and as long as it remains above about 72, the chart seems to be trying to tell us that a break to the upside of the flag is getting very possible.
Thanks so much for reading! Have a great weekend!
Tom Crowley
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
Daily Market Commentary Archives
To get weekly or daily notifications when we post new commentary, sign up HERE.
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.
