Stocks started Monday on the wobbly side and the S&P 500 was negative for most of the day, dipping back below a key resistance level that we have been watching closely, before it took off in the afternoon and closed at the highs of the day with a solid gain. The Dow gained 95-points, overcoming an earlier 300+ loss. The Russell 2000 overcame a 1.5% intraday loss to close flat, and the S-fund came in somewhere between the two. Oil was down sharply, and that may have been the catalyst for the rally in stocks.
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The 2-year and 10-year bond yields are the key ones to watch when taking about a yield curve inversion and a predictor of a future recession. But recently the 3-year yield moved above the 5-year bond yield, and both moved above the yield of the 30-year. These are also considered inversions and the financial community is making note because it is not meaningless.
Internally yesterday, it wasn't quite the bullish picture that the gains in the indices depicted. It was close but there were actually more stocks down on the day, than up. Volume was positive and that was from the strength of the heavily traded tech stocks. There were also a lot more new lows than new highs on the day.
This chart of the key Dow Transportation Index recently broke above some long term resistance, and it looks like a solid bull flag being formed, which more often than not, break to the upside. We have seen a lot of bull flags break down on the small caps chart, but after the bell yesterday FedEx was up about 3.5% and that could be the catalyst this market leading index uses to breakout.
It's Tuesday, and after a pretty good explosion off the lows, if the bears are going to make a move, a Turnaround Tuesday might be the day. We're at a very pivotal point here for stocks as overhead resistance gets taken out while the short-term indicators are getting stretched to overbought levels, and the fear we once saw in the indicators is evaporating. Those are good things until they get extreme.
The S&P 500 (C-fund) reversed a negative morning to post another day of solid gains. There is a lot of resistance near 4600, but so far the chart hasn't had much trouble getting over some of the resistance that is now in its rear view mirror. There's a possible rising wedge formation here, and they tend to break down, so that makes 4600 that much more important.
DWCPF (small caps / S-fund) also bucked some large morning losses to close up nicely on the day. It remains above that 50-day EMA and the bull flag appears to be holding up well. The open gap is still down by 1840, but it isn't that large so it may not be as compelling. It will probably get filled one day, whether next week or next year, but I wouldn't focus on it as compulsory.
The EFA (I-fund) was down as the strength in the dollar was a little too much for it. Plus the strength in the U.S. markets came late and the overseas market didn't get a chance to react to that move. There's a bull flag here as well, but the gap is a lot wider that that one on the S-fund chart, and it is still below the 50-day EMA.
BND (Bonds / F-fund) had a good day but remains in an ugly descending trading channel.
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
To get weekly or daily notifications when we post new commentary, sign up HERE.
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 certainly a "risk on" kind of day as we saw Bitcoin jump about 8%. And those meme stocks? Gamestop was up 25% yesterday, and AMC was up just 45% -- in one day. Tesla was up 8%. Sounds like the 2020 all all over again. So what happened?
For one thing, one of the market's recent main concerns saw some relief as the price of oil tanked 7% yesterday. The chart is testing the 20 day average and is back in the ascending trading channel, but the break below 110 creates the possibility of a lower high forming. We'll see if the 20-day EMA holds, and then $100. But does anyone think "they" will push oil right back down with the oil companies just getting us used to paying $4 a gallon for gas?
Some of that loss had to do with a rally in the dollar yesterday as we saw the metals, gold, silver, copper, platinum, etc., all fall on the day.
Although down slightly yesterday, the 10-year bond yield is still near its highs, interest rates are going to climb, inflation is still a problem, the war is still on, GDP is just north of flat, yada, yada, yada, but the bulls are trying to tell us that it has all been priced in already. That's possible, and while the bounce off the lows looks a little extended, the charts look a lot better than they did a couple of weeks ago. But have they priced in a yield curve inversion? For one thing, one of the market's recent main concerns saw some relief as the price of oil tanked 7% yesterday. The chart is testing the 20 day average and is back in the ascending trading channel, but the break below 110 creates the possibility of a lower high forming. We'll see if the 20-day EMA holds, and then $100. But does anyone think "they" will push oil right back down with the oil companies just getting us used to paying $4 a gallon for gas?
Some of that loss had to do with a rally in the dollar yesterday as we saw the metals, gold, silver, copper, platinum, etc., all fall on the day.
The 2-year and 10-year bond yields are the key ones to watch when taking about a yield curve inversion and a predictor of a future recession. But recently the 3-year yield moved above the 5-year bond yield, and both moved above the yield of the 30-year. These are also considered inversions and the financial community is making note because it is not meaningless.
Internally yesterday, it wasn't quite the bullish picture that the gains in the indices depicted. It was close but there were actually more stocks down on the day, than up. Volume was positive and that was from the strength of the heavily traded tech stocks. There were also a lot more new lows than new highs on the day.
This chart of the key Dow Transportation Index recently broke above some long term resistance, and it looks like a solid bull flag being formed, which more often than not, break to the upside. We have seen a lot of bull flags break down on the small caps chart, but after the bell yesterday FedEx was up about 3.5% and that could be the catalyst this market leading index uses to breakout.
It's Tuesday, and after a pretty good explosion off the lows, if the bears are going to make a move, a Turnaround Tuesday might be the day. We're at a very pivotal point here for stocks as overhead resistance gets taken out while the short-term indicators are getting stretched to overbought levels, and the fear we once saw in the indicators is evaporating. Those are good things until they get extreme.
The S&P 500 (C-fund) reversed a negative morning to post another day of solid gains. There is a lot of resistance near 4600, but so far the chart hasn't had much trouble getting over some of the resistance that is now in its rear view mirror. There's a possible rising wedge formation here, and they tend to break down, so that makes 4600 that much more important.
DWCPF (small caps / S-fund) also bucked some large morning losses to close up nicely on the day. It remains above that 50-day EMA and the bull flag appears to be holding up well. The open gap is still down by 1840, but it isn't that large so it may not be as compelling. It will probably get filled one day, whether next week or next year, but I wouldn't focus on it as compulsory.
The EFA (I-fund) was down as the strength in the dollar was a little too much for it. Plus the strength in the U.S. markets came late and the overseas market didn't get a chance to react to that move. There's a bull flag here as well, but the gap is a lot wider that that one on the S-fund chart, and it is still below the 50-day EMA.
BND (Bonds / F-fund) had a good day but remains in an ugly descending trading channel.
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
To get weekly or daily notifications when we post new commentary, sign up HERE.
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.
