Stocks rallied on Friday after the January jobs report was released, finishing the best week for stocks since November. The Dow gained a modest 92-points and once again it was tech and the small caps leading on the upside. Bonds fell sharply as yields rose, and the dollar pulled back from its recent spike higher.
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The January Jobs Report came in with 49,000 jobs being added, just short of the 50,000 consensus estimates had expected, and the unemployment rate declined to 6.4%, lower that the 6.7% estimate.
The 49,000 was not a blockbuster number in an economy that is supposedly growing rapidly from the 2020 COVID crash, but in a "normal" economy it is solid. That seemed to be a number that Wall Street was fine with as it shows growth, but perhaps not on a level that would negatively impact any pending stimulus negotiations.
Internally the numbers were good, although the share volume, which isn't shown below, was skewed again by those highly traded short-squeeze stocks, which have been getting pounded in recent days.
Seeing those stocks fall again may be giving investors some comfort, if that makes sense. I don't take sides with either the hedge funds or those Reddit short-squeeze traders because it is a market and as long as one party is willing to buy at a certain price, and there is a matching sell order on the other side, then it's fair trade to me. Anybody getting involved in trading those issues like Gamestop know what they are getting into so they get what is or isn't coming to them. So, seeing those stocks moving closer to their "reasonable" prices may be giving some comfort to investors, and it may be why we got passed that late January hiccup.
Of course that doesn't mean stocks will go up indefinitely. Momentum is on the bulls' side but the charts and indicators do have some issues.
The S&P 500 (C-fund) was up everyday last week to start February off with a bang, after the late January pullback. Next stop 3910? The overhead resistance is now near 3910, but it is rising so it is a moving target and the S&P could slide up along that line for a while, but we could also see some profit taking and a modest pullback and still keep that rising trading channel intact.
The weekly chart is pointing higher and looking as bullish as it possibly can, but of course that has been he case for many weeks now and the chart is getting quite extended above its 200-day EMA (about 1000-points), and it may not be the most healthy set up. Seeing a move down toward the lower end of the blue rising trading channel at some point in the coming weeks / months wouldn't be the biggest surprise that we could get.
The DWCPF (small caps / S-fund) had a huge 5 day rally last week, gaining 7.5%. The pullback during the prior week was needed but here it is getting stretched again. It is now as far above its 200-day EMA as it has been in a long while, and also quite a bit above its 20-day EMA that some flat to lower action this week wouldn't be hard to imagine.
The EFA (I-fund) rallied on Friday and moved into an open gap and above some potential resistance, so that's a positive here. It would likely need the rally in the dollar to take a break to outperform the U.S. indices this week.
The dollar tumbled on Friday after the jobs report, and perhaps we can say it was due for a pullback after the recent rally. The key here may be whether it can bounce back off the 50-day EMA or if it falls below it again and goes after that open gap - where there is some rising support. So there are some signs of the dollar coming back to life, but we need to watch that 24.40 area to see if it can hold on any further pullback.
The Volatility Index is at a two month low after the late January spike to 37. As we saw in November, coming off one of those spikes led to weeks of drifting lower in the VIX, but that was right after the election and possibly a different situation.
BND (bonds / F-fund) resumed its slide downward after that strong positive reversal on Thursday. That tells me that the bond market appreciated the jobs report since yields were up sharply. The bear flag is still in play with a downside target of about 86.30 if the prior lows can't hold.
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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The January Jobs Report came in with 49,000 jobs being added, just short of the 50,000 consensus estimates had expected, and the unemployment rate declined to 6.4%, lower that the 6.7% estimate.
The 49,000 was not a blockbuster number in an economy that is supposedly growing rapidly from the 2020 COVID crash, but in a "normal" economy it is solid. That seemed to be a number that Wall Street was fine with as it shows growth, but perhaps not on a level that would negatively impact any pending stimulus negotiations.
Internally the numbers were good, although the share volume, which isn't shown below, was skewed again by those highly traded short-squeeze stocks, which have been getting pounded in recent days.
Seeing those stocks fall again may be giving investors some comfort, if that makes sense. I don't take sides with either the hedge funds or those Reddit short-squeeze traders because it is a market and as long as one party is willing to buy at a certain price, and there is a matching sell order on the other side, then it's fair trade to me. Anybody getting involved in trading those issues like Gamestop know what they are getting into so they get what is or isn't coming to them. So, seeing those stocks moving closer to their "reasonable" prices may be giving some comfort to investors, and it may be why we got passed that late January hiccup.
Of course that doesn't mean stocks will go up indefinitely. Momentum is on the bulls' side but the charts and indicators do have some issues.
The S&P 500 (C-fund) was up everyday last week to start February off with a bang, after the late January pullback. Next stop 3910? The overhead resistance is now near 3910, but it is rising so it is a moving target and the S&P could slide up along that line for a while, but we could also see some profit taking and a modest pullback and still keep that rising trading channel intact.
The weekly chart is pointing higher and looking as bullish as it possibly can, but of course that has been he case for many weeks now and the chart is getting quite extended above its 200-day EMA (about 1000-points), and it may not be the most healthy set up. Seeing a move down toward the lower end of the blue rising trading channel at some point in the coming weeks / months wouldn't be the biggest surprise that we could get.
The DWCPF (small caps / S-fund) had a huge 5 day rally last week, gaining 7.5%. The pullback during the prior week was needed but here it is getting stretched again. It is now as far above its 200-day EMA as it has been in a long while, and also quite a bit above its 20-day EMA that some flat to lower action this week wouldn't be hard to imagine.
The EFA (I-fund) rallied on Friday and moved into an open gap and above some potential resistance, so that's a positive here. It would likely need the rally in the dollar to take a break to outperform the U.S. indices this week.
The dollar tumbled on Friday after the jobs report, and perhaps we can say it was due for a pullback after the recent rally. The key here may be whether it can bounce back off the 50-day EMA or if it falls below it again and goes after that open gap - where there is some rising support. So there are some signs of the dollar coming back to life, but we need to watch that 24.40 area to see if it can hold on any further pullback.
The Volatility Index is at a two month low after the late January spike to 37. As we saw in November, coming off one of those spikes led to weeks of drifting lower in the VIX, but that was right after the election and possibly a different situation.
BND (bonds / F-fund) resumed its slide downward after that strong positive reversal on Thursday. That tells me that the bond market appreciated the jobs report since yields were up sharply. The bear flag is still in play with a downside target of about 86.30 if the prior lows can't hold.
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.
