Friday was a flat day after the tremendous election week rally. The Dow was down 67-points, and S&P 500 lost 1, and that was after a monster 7 - 8% rally in TSP funds last week in the preceding four days of trading. The jobs report was good but the market had come a long way leading up to that report and we may have seen some profit taking to end the week, so the bears were unable to do much more than that. Are they going to take a stand this week as we approach some resistance on the charts?
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We got a decent jobs report before the bell on Friday. 638,000 jobs were gained in October and while I saw higher estimates, the media was saying they were looking for a gain of less than 600K. The 6.9% unemployment rate was a surprise, and almost a full percent below estimates.
COVID cases continue to climb to new records with more than 125,000 new cases on both Friday and Saturday. That pattern of record cases has been happening for a month now, and every time the market goes down it is suggested that it is because of this increase, but last week the market completely ignored it since it was distracted by the election, and what looked like a post election "buy the news" reaction to the pre-election week's "sell the rumor" decline.
Despite the results still being unofficial, the market may start looking past the election and start focusing on COVID again. With Joe Biden suggesting in that last presidential debate that it could be a "Dark Winter" and I can only assume that means more aggressive actions to thwart the virus, which doesn't sound good for the economy next year. Perhaps a vaccine will change that.
So as good as that jobs report suggests the economy is growing, there may not be a clear path for that continuing, and I don't know if the market has reacted to that yet.
Of course if this presidential race somehow goes for Trump after the lawsuits and recounts, I can only imagine the fallout from that. The market may not care, but chaos in the streets would likely ensue.
We knew that a lot of investors stepped aside into cash before the election, and that may have been what caused the improbable gain of 7% during the chaotic election week. Investors had to play catch up, and there may be some of that left, but once they are done, are we really sure where the economy and the market is heading?
Internally the numbers were flat, along with the indices, but we head into the new week with the bulls in charge and with momentum, and the bears with something to prove if they want us to believe last week's rally was overdone.
The futures opened up significantly higher on Sunday so we could see yet another open gap on the charts. Monday morning gaps can't always be trusted, but upside gaps tend to hold more firmly than downside Monday open gaps.
The S&P 500 (C-fund) was flat on Friday and remains in this large trading channel, which looks like some kind of flag. This could very well be a bullish flag but that doesn't mean it can't go back down to test the bottom of the flag - and fill in some of those open gaps in the process. However, the more mature a flag gets, the more likely it is going to resolve itself more quickly.
The weekly chart shows it at the top of a bullish looking flag, but it needs to breakout soon or another pullback into the flag is possible.
The DWCPF (S-fund) had a false breakout on Friday, but the futures may be indicating it could be giving it another try on Monday. This sounds like a broken record, but being up against some resistance with open gaps below may make it more vulnerable.
The EFA (I-fund) looks like piece Swiss cheese with all of those large open gaps. It's at the top of a range (red), and at the top of a megaphone pattern (blue), so it looks like there could be some resistance at Friday's highs, but last week it was as if someone threw a switch once we got passed the election (actually the Monday before election day, which was interesting.)
The Dow Transportation Index had a nice bounce last week although it was a little more choppy than the rest of the market. It's probably too early to say, but we may be seeing the right shoulder of a head and shoulders pattern being formed, and that generally is a bearish indication.
BND (F-fund) was down sharply on the day as yields snapped back on Friday. There is a large open gap on the chart, but the top of that old blue trading channel could now turn into support.
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
[/COLOR]
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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We got a decent jobs report before the bell on Friday. 638,000 jobs were gained in October and while I saw higher estimates, the media was saying they were looking for a gain of less than 600K. The 6.9% unemployment rate was a surprise, and almost a full percent below estimates.
COVID cases continue to climb to new records with more than 125,000 new cases on both Friday and Saturday. That pattern of record cases has been happening for a month now, and every time the market goes down it is suggested that it is because of this increase, but last week the market completely ignored it since it was distracted by the election, and what looked like a post election "buy the news" reaction to the pre-election week's "sell the rumor" decline.
Despite the results still being unofficial, the market may start looking past the election and start focusing on COVID again. With Joe Biden suggesting in that last presidential debate that it could be a "Dark Winter" and I can only assume that means more aggressive actions to thwart the virus, which doesn't sound good for the economy next year. Perhaps a vaccine will change that.
So as good as that jobs report suggests the economy is growing, there may not be a clear path for that continuing, and I don't know if the market has reacted to that yet.
Of course if this presidential race somehow goes for Trump after the lawsuits and recounts, I can only imagine the fallout from that. The market may not care, but chaos in the streets would likely ensue.
We knew that a lot of investors stepped aside into cash before the election, and that may have been what caused the improbable gain of 7% during the chaotic election week. Investors had to play catch up, and there may be some of that left, but once they are done, are we really sure where the economy and the market is heading?
Internally the numbers were flat, along with the indices, but we head into the new week with the bulls in charge and with momentum, and the bears with something to prove if they want us to believe last week's rally was overdone.
The futures opened up significantly higher on Sunday so we could see yet another open gap on the charts. Monday morning gaps can't always be trusted, but upside gaps tend to hold more firmly than downside Monday open gaps.
The S&P 500 (C-fund) was flat on Friday and remains in this large trading channel, which looks like some kind of flag. This could very well be a bullish flag but that doesn't mean it can't go back down to test the bottom of the flag - and fill in some of those open gaps in the process. However, the more mature a flag gets, the more likely it is going to resolve itself more quickly.
The weekly chart shows it at the top of a bullish looking flag, but it needs to breakout soon or another pullback into the flag is possible.
The DWCPF (S-fund) had a false breakout on Friday, but the futures may be indicating it could be giving it another try on Monday. This sounds like a broken record, but being up against some resistance with open gaps below may make it more vulnerable.
The EFA (I-fund) looks like piece Swiss cheese with all of those large open gaps. It's at the top of a range (red), and at the top of a megaphone pattern (blue), so it looks like there could be some resistance at Friday's highs, but last week it was as if someone threw a switch once we got passed the election (actually the Monday before election day, which was interesting.)
The Dow Transportation Index had a nice bounce last week although it was a little more choppy than the rest of the market. It's probably too early to say, but we may be seeing the right shoulder of a head and shoulders pattern being formed, and that generally is a bearish indication.
BND (F-fund) was down sharply on the day as yields snapped back on Friday. There is a large open gap on the chart, but the top of that old blue trading channel could now turn into support.
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
[/COLOR]
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.
