Stocks continued their rebound off the recent pullback low, and it didn't take long to get back to new highs. The Dow gained 332-points, and it is the only one of the big three indices (4 including the Russell 2000) to not make a new high yesterday. The dollar remains in rally mode putting pressure on the I-find, and bonds reversed upward after a morning sell off. The small caps led with another big gain.
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It has been a strong start to February despite its reputation for being one of the weaker months of the year.
Chart provided courtesy of www.sentimentrader.com
I know last year was a disaster for February, but I went back 11 years to see what was going on in prior Februarys, and to my surprise the S&P 500 has done quite well. The 11 year average in February is a gain of 1.63% with only three of the 11 being negative months. The best year we had was a gain of 5.75% in 2015, but a 3% to 4% gain was more typical. The S&P 500 is up 4.24% in the first four days of this February so far. Should you be satisfied and lock in those gains, or keep pushing?
We get the January Jobs Report before the opening bell this morning (Friday), and that's always a potential market mover. The estimates are looking for a gain of about 50,000 jobs, and an unemployment rate of 6.7%. If you recall, we lost 140,000 jobs in the prior report and stocks rallied that day, but drifted sideways to slightly lower for about a week afterward.
With stimulus continuing to discussed, we could still be in the "bad news is good news" phase for economic data, which could also mean good news is bad news. Either way, we could see money managers making shifts between the stay at home economy stocks and the old economy stocks, so we could see a pick up in volatility.
The S&P 500 (C-fund) made a new all-time high yesterday, both intraday and on a closing basis. You can see that the rising channel is still intact after the January scare, which held at the 50-day EMA instead of at the bottom of the channel. With the jobs report on tap, we could always see a big move in stocks, but even if we do see a breakout, you can see that the breakout level tends to get revisited within several days, so I'd expect any further rally to consolidate quickly.
The DWCPF (small caps / S-fund) had a huge day on Thursday and is now firmly back in that red rising channel after breaking back above the lower support line, and it is also making its way to the top of that blue rising channel.
The EFA (I-fund) is lagging a bit because the dollar has been rallying all month. It found perfect support at the 50-day EMA, but it may need the dollar to pullback for it to be able to break back above its support line that broke last week. yesterday's loss in the I-fund was likely due to Wednesday's inflated price. (Fair value adjustment.)
BND (bonds / F-fund) reversed early on Thursday to erase a big early loss. In the process it filled that open gap near 87 that we've been watching. Perhaps it won't test the prior lows, which is actually the lower end of a large trading range that this has been in for months. That reversal could be a bullish short-term indication for bonds, but being below the 20 and 50-day EMA's, this is still considered a bearish looking chart.
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. Have a great weekend!
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 has been a strong start to February despite its reputation for being one of the weaker months of the year.
Chart provided courtesy of www.sentimentrader.com
I know last year was a disaster for February, but I went back 11 years to see what was going on in prior Februarys, and to my surprise the S&P 500 has done quite well. The 11 year average in February is a gain of 1.63% with only three of the 11 being negative months. The best year we had was a gain of 5.75% in 2015, but a 3% to 4% gain was more typical. The S&P 500 is up 4.24% in the first four days of this February so far. Should you be satisfied and lock in those gains, or keep pushing?
We get the January Jobs Report before the opening bell this morning (Friday), and that's always a potential market mover. The estimates are looking for a gain of about 50,000 jobs, and an unemployment rate of 6.7%. If you recall, we lost 140,000 jobs in the prior report and stocks rallied that day, but drifted sideways to slightly lower for about a week afterward.
With stimulus continuing to discussed, we could still be in the "bad news is good news" phase for economic data, which could also mean good news is bad news. Either way, we could see money managers making shifts between the stay at home economy stocks and the old economy stocks, so we could see a pick up in volatility.
The S&P 500 (C-fund) made a new all-time high yesterday, both intraday and on a closing basis. You can see that the rising channel is still intact after the January scare, which held at the 50-day EMA instead of at the bottom of the channel. With the jobs report on tap, we could always see a big move in stocks, but even if we do see a breakout, you can see that the breakout level tends to get revisited within several days, so I'd expect any further rally to consolidate quickly.
The DWCPF (small caps / S-fund) had a huge day on Thursday and is now firmly back in that red rising channel after breaking back above the lower support line, and it is also making its way to the top of that blue rising channel.
The EFA (I-fund) is lagging a bit because the dollar has been rallying all month. It found perfect support at the 50-day EMA, but it may need the dollar to pullback for it to be able to break back above its support line that broke last week. yesterday's loss in the I-fund was likely due to Wednesday's inflated price. (Fair value adjustment.)
BND (bonds / F-fund) reversed early on Thursday to erase a big early loss. In the process it filled that open gap near 87 that we've been watching. Perhaps it won't test the prior lows, which is actually the lower end of a large trading range that this has been in for months. That reversal could be a bullish short-term indication for bonds, but being below the 20 and 50-day EMA's, this is still considered a bearish looking chart.
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. Have a great weekend!
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.
