Stocks sold off again on Friday, with those FAANG earnings being one of the main catalysts, although COVID and the election is still part of the equation. A late rally took the indices off their lows as investors didn't seem to want to be short heading into the weekend, perhaps in hopes of a stimulus deal may be done, and the indices were certainly getting oversold in the short-term. The Dow lost "just" 158-points, or 0.59%, but the broader indices took a much stiffer hit.
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As rough as the day was, the internal numbers weren't that bad with declining volume leading advancing by just over 3 to 2. The Nasdaq was a little worse with just over 2 to 1 decliners leading. Remember that 9 to 1 day we had earlier in the week? Perhaps the selling is running out of steam? That may be the case, but the situation is still what it is with two more trading days before the voting ends.
Apple was a driver of the sell off on Friday after they failed to give guidance for their next quarter, but that is actually not that uncommon for them. I remember after the late 2018 / early 2019 market 20% decline, Apple started 2019 with some negative guidance and the stock had an even worse reaction than Friday's as the share price got slammed by 10% on the day, but check out the next chart - the full 2019 chart - to see what happened next.
As both political parties bring out their big guns in the final stretch before the election, we can't help be reminded of 2016. Stocks were tumbling in October and into November before that 2016 election, and then the day after the election, it was as if someone flipped a switch. 2020 may not be 2016, but they are similar in many ways, so would this type of reaction be out of the question for this post-election market? Probably not - if a winner is declared quickly.
The October jobs report comes out on Friday and, depending on the status of the country in the aftermath of the election, this may or may not be something the market will be too focused on. But if it is a factor, the estimates are looking for a gain of about 675,000 jobs, and an unemployment rate of 7.7%.
The S&P 500 (C-fund) kept the downside rolling with another lower low after those disappointing earnings reports from FAANG. There's a large open gap up by 3380 that could get filled on any snap-back rally, but investor are more focused on the situation in front of them which is the election, COVID cases, and lack of stimulus. The September low is there as a potential double bottom, but the 200-day EMA is always in play in a decline like this, and it is currently sitting at 3198. We also saw what could be a positive reversal created with the late rally, but with the VIX so high, you never know where this will land by the close.
The weekly chart of the S&P 500 shows a break down in the recent rising trading channel, but the question is whether that is a buyable break down as it triggered a bunch of stops below that line, which could turn into a capitulation like low. We should know soon enough, and given the uncertainly over at least the next two days, I don't know how much "typical" action and reactions we should expect.
The DWCPF (S-fund) lost 2% on Friday and it closed between two pretty good sized open gaps (red boxes.) The selling seemed overdone in the short-term, but we'll have to see how investors react to any relief rally. They could sell it, or embrace it.
The Dow Transportation Index had pulled back to the September lows and so far that has held. This could be the head of a head and shoulders pattern. The bad news is that they tend to break down eventually. The good news is, in the short-term, we could see a right shoulder rally form.
The dollar was up sharply last week and that added to the decline in the EFA (I-fund) and it's why the I-fund has been lagging the U.S. funds recently. It fell right through the 200-day EMA on Wednesday, creating a giant open gap. The rising COVID cases and its impact on the economy in Europe has become a big concern.
The yield on the 10-year jumped again on Friday, closing at a new 4-month high. That doesn't sound like an economy in trouble, and it may be trying to tell us that the volatility is just election noise.
BND (F-fund) fell sharply as those yields rose, but there may have been some support holding at the lows on Friday. The trend is still down however, so that could mean any rally in bonds will be short-lived.
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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As rough as the day was, the internal numbers weren't that bad with declining volume leading advancing by just over 3 to 2. The Nasdaq was a little worse with just over 2 to 1 decliners leading. Remember that 9 to 1 day we had earlier in the week? Perhaps the selling is running out of steam? That may be the case, but the situation is still what it is with two more trading days before the voting ends.
Apple was a driver of the sell off on Friday after they failed to give guidance for their next quarter, but that is actually not that uncommon for them. I remember after the late 2018 / early 2019 market 20% decline, Apple started 2019 with some negative guidance and the stock had an even worse reaction than Friday's as the share price got slammed by 10% on the day, but check out the next chart - the full 2019 chart - to see what happened next.
As both political parties bring out their big guns in the final stretch before the election, we can't help be reminded of 2016. Stocks were tumbling in October and into November before that 2016 election, and then the day after the election, it was as if someone flipped a switch. 2020 may not be 2016, but they are similar in many ways, so would this type of reaction be out of the question for this post-election market? Probably not - if a winner is declared quickly.
The October jobs report comes out on Friday and, depending on the status of the country in the aftermath of the election, this may or may not be something the market will be too focused on. But if it is a factor, the estimates are looking for a gain of about 675,000 jobs, and an unemployment rate of 7.7%.
The S&P 500 (C-fund) kept the downside rolling with another lower low after those disappointing earnings reports from FAANG. There's a large open gap up by 3380 that could get filled on any snap-back rally, but investor are more focused on the situation in front of them which is the election, COVID cases, and lack of stimulus. The September low is there as a potential double bottom, but the 200-day EMA is always in play in a decline like this, and it is currently sitting at 3198. We also saw what could be a positive reversal created with the late rally, but with the VIX so high, you never know where this will land by the close.
The weekly chart of the S&P 500 shows a break down in the recent rising trading channel, but the question is whether that is a buyable break down as it triggered a bunch of stops below that line, which could turn into a capitulation like low. We should know soon enough, and given the uncertainly over at least the next two days, I don't know how much "typical" action and reactions we should expect.
The DWCPF (S-fund) lost 2% on Friday and it closed between two pretty good sized open gaps (red boxes.) The selling seemed overdone in the short-term, but we'll have to see how investors react to any relief rally. They could sell it, or embrace it.
The Dow Transportation Index had pulled back to the September lows and so far that has held. This could be the head of a head and shoulders pattern. The bad news is that they tend to break down eventually. The good news is, in the short-term, we could see a right shoulder rally form.
The dollar was up sharply last week and that added to the decline in the EFA (I-fund) and it's why the I-fund has been lagging the U.S. funds recently. It fell right through the 200-day EMA on Wednesday, creating a giant open gap. The rising COVID cases and its impact on the economy in Europe has become a big concern.
The yield on the 10-year jumped again on Friday, closing at a new 4-month high. That doesn't sound like an economy in trouble, and it may be trying to tell us that the volatility is just election noise.
BND (F-fund) fell sharply as those yields rose, but there may have been some support holding at the lows on Friday. The trend is still down however, so that could mean any rally in bonds will be short-lived.
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.
