Stocks were mixed on Tuesday with many stocks taking a day to rest after the recent winning streak. The Nasdaq and the small caps continued their leadership and winning ways with the Russell 2000 and S-fund still not posting a negative day in February. The Dow slipped 10-points, the dollar broke below support, and bonds were down slightly.
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It was a quiet day of trading on Tuesday as we saw some of the indices finally take a breather, but one thing that has not taken a breather is the price of oil. Of course oil can be a measure of economic strength based on demand, as well as supply issues, but with the economy trying to recover from the COVID crash, it has been oil that has been a benefactor. It's pretty stretched to the upside here on the chart, but more importantly, it is getting close to $60 a barrel again.
My friend Oscar Carboni from LiveWithOscar.com mentioned recently that if oil prices move near $60 it will be an anchor on the economic recovery. The closing high back before COVID was about $63 and here it is within reach of testing that level again, after falling all the way down to about $7 at the panic lows in April of last year.
The price of gasoline is directly related to the price of oil and with that price now 8 times the price it was in April, we will obviously see a lot higher gas prices this spring and summer than we saw last year.
It sounds like we could have some extra spending money coming our way once the stimulus bill is passed and funds distributed, and that may take the sting out of the extra money we'll pay for gas, but as Oscar says, it's a lot more than filling up at the pump. Delivery prices, travel prices, and the price of doing business with anything that requires fueling up could see increases. And with the value of the dollar still sinking, perhaps it will trigger an unexpected increase in inflation, which gets the Fed talking about raising interest rates, etc.
So, after a quiet day in the market, the sharp increase in the price of oil has gotten my attention, and that $60 price may be something to keep an eye on.
The S&P 500 (C-fund) made another new intraday high yesterday despite the slight loss on the day. It remains at the top of its trading channel so the risk / reward may be on the risky side, but it can still ride along the bottom of that overhead resistance without falling for a while, as it did in mid-January, but the odds of a pullback will rise with each day that it doesn't fall.
The DWCPF (small caps / S-fund) rallied for a seventh straight day yesterday, and the the 0.49% gain pushed it just above the top of that red rising channel and closer to the top of the steeper blue channel.
The EFA (I-fund) got a break from the dollar's decline as it gained 0.54% on the day and it is now testing the January highs.
The dollar broke back below its 50-day EMA and below the red short-term rising trading channel, so this looks bad right now. As we mentioned above, the weakness in the dollar does help lift prices higher, and that includes the price of oil, which may be getting a little too rich for this bruised economy.
The Dow Transportation Index had another big day and I have been watching this to see if it wants to get to new highs, or if this is the right shoulder of a head and shoulders pattern being created. The latter would be a bearish sign for this, and other stock indices, since the Transports are generally considered one of the market leaders.
BND (bonds / F-fund) were down and instead of seeing a rebound off the recent lows, we're seeing more of a bear flag formation being formed. It wouldn't be too shocking to see this break down if the economy is going to get hit with a bunch of stimulus, but at this point it wouldn't be a surprise so you would think it would be priced in already.
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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It was a quiet day of trading on Tuesday as we saw some of the indices finally take a breather, but one thing that has not taken a breather is the price of oil. Of course oil can be a measure of economic strength based on demand, as well as supply issues, but with the economy trying to recover from the COVID crash, it has been oil that has been a benefactor. It's pretty stretched to the upside here on the chart, but more importantly, it is getting close to $60 a barrel again.
My friend Oscar Carboni from LiveWithOscar.com mentioned recently that if oil prices move near $60 it will be an anchor on the economic recovery. The closing high back before COVID was about $63 and here it is within reach of testing that level again, after falling all the way down to about $7 at the panic lows in April of last year.
The price of gasoline is directly related to the price of oil and with that price now 8 times the price it was in April, we will obviously see a lot higher gas prices this spring and summer than we saw last year.
It sounds like we could have some extra spending money coming our way once the stimulus bill is passed and funds distributed, and that may take the sting out of the extra money we'll pay for gas, but as Oscar says, it's a lot more than filling up at the pump. Delivery prices, travel prices, and the price of doing business with anything that requires fueling up could see increases. And with the value of the dollar still sinking, perhaps it will trigger an unexpected increase in inflation, which gets the Fed talking about raising interest rates, etc.
So, after a quiet day in the market, the sharp increase in the price of oil has gotten my attention, and that $60 price may be something to keep an eye on.
The S&P 500 (C-fund) made another new intraday high yesterday despite the slight loss on the day. It remains at the top of its trading channel so the risk / reward may be on the risky side, but it can still ride along the bottom of that overhead resistance without falling for a while, as it did in mid-January, but the odds of a pullback will rise with each day that it doesn't fall.
The DWCPF (small caps / S-fund) rallied for a seventh straight day yesterday, and the the 0.49% gain pushed it just above the top of that red rising channel and closer to the top of the steeper blue channel.
The EFA (I-fund) got a break from the dollar's decline as it gained 0.54% on the day and it is now testing the January highs.
The dollar broke back below its 50-day EMA and below the red short-term rising trading channel, so this looks bad right now. As we mentioned above, the weakness in the dollar does help lift prices higher, and that includes the price of oil, which may be getting a little too rich for this bruised economy.
The Dow Transportation Index had another big day and I have been watching this to see if it wants to get to new highs, or if this is the right shoulder of a head and shoulders pattern being created. The latter would be a bearish sign for this, and other stock indices, since the Transports are generally considered one of the market leaders.
BND (bonds / F-fund) were down and instead of seeing a rebound off the recent lows, we're seeing more of a bear flag formation being formed. It wouldn't be too shocking to see this break down if the economy is going to get hit with a bunch of stimulus, but at this point it wouldn't be a surprise so you would think it would be priced in already.
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.
