The bulls woke up on another Turnaround Tuesday and we saw big gains in most of the indices, so the bullish Bullard comments after the bell on Monday that we talked about yesterday, did rollover into the new trading day. The Dow gained 500-points while the high beta stocks of the Nasdaq and small caps led on the upside. Many of the charts ran up to their next level of resistance, so there may be more work to do for the bulls. Oil and other commodities fell sharply on the day, while bonds and the dollar were up again.
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Internally the numbers were strong, but it's a little too early to say if this was another low in the indices since the indicators were getting oversold and investors had gotten extremely bearish, so some relief was due regardless.
The advancers beat declining stocks on the NYSE and Nasdaq by about 2 and 2.5 to 1 respectively, and those high tech stocks actually saw volume at 3.4 to 1 A/D ratio, but after Netflix yesterday, that may not look the same after today's close.
The yield on the 10-year Treasury was up yet again, and it seems like we were just talking about the market being worried about a 2% yield, and yesterday it nearly hit 3% as it got as high as 2.93%.
The Dow Transportation Index, one of the more economically sensitive indices and a key market leader, recently did a swan dive off its highs and it's not very common to see a complete reversal of a move like that, so it was more likely that any rebound would be short-lived. Well, here we go. It bounced back above its 300-day average, as it did in February, and now it is quickly back up testing the 200-day EMA. What happens from here could be a huge tell for the rest of the market. If this stalls here it could be telling us not to get too excited about yesterday's rally in the major indices.
Yesterday's action was bullish, but we generally see the biggest rallies in the stock market after the biggest draw downs, and right now it is just a good start and we may have to be patient because I don't think we can count on anything just yet. Part of it could be a post tax deadline rally. We had an oversold / overly bearish set up for a relief rally, and now that we got one we probably need to see some follow through or the bears will pounce again.
The S&P 500 (C-fund) gained 1.6% yesterday and not a moment too soon as it flirted with that 200-day EMA (blue) for days and was trying to a void a 3rd straight close below it. It did close just slightly above the 50-day EMA (purple) and the descending trading channel, but the futures were lower after hours because of Netflix so I think it's premature to call it a breakout.
DWCPF (S-fund / small caps) had a big day, as small caps tend to do when there's a broad market rally, but we know how brutal the losses can be in the small caps if the market starts to give back those gains. It closed below the 50-day EMA but just above the 50-day simple average. I would still expect that open gap near 1960 to attempt to be filled, but the top of that gap could also prove to be resistance for the rally.
The EFA (I-fund) was up but another move higher in the dollar had it underperforming the U.S. indices. No break in the descending trading channel, and the open gap down near 70 is still something to keep an eye on.
BND (Bonds / F-fund) will eventually be a place to look for a bargain, but the trend is still too negative for me to get interested.
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
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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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We had another "after the bell" incident yesterday as Netflix reported a disappointing earnings report and that sent the S&P 500, Nasdaq, and Russell 2000 futures down shortly after that closing bell rang. I know Netflix is a big part of Nasdaq and the old "FAANG" stocks, but as I have said before, if our economy is being judged by how many people are sitting in front of their TV's, we're in trouble. I think there are a few reasons why Netflix's growth has slowed, and actually contracted the number of subscribers - competition being one with a lot of good movie and TV content to be found all over the internet. So this may just be another bubble bursting in the high tech growth stocks, while the shift to value stocks continues.
So with Netflix down about 25% after hours on Tuesday (and close to 60% off the 2022 highs), we will soon see if investors compartmentalize that information and move into other areas of the market, or if they start selling other names fearing the slowdown in growth, but we know fear has been pretty high already so perhaps the bulls will view this as a buying opportunity for any stock down in sympathy with the Netflix disaster.
Internally the numbers were strong, but it's a little too early to say if this was another low in the indices since the indicators were getting oversold and investors had gotten extremely bearish, so some relief was due regardless.
The advancers beat declining stocks on the NYSE and Nasdaq by about 2 and 2.5 to 1 respectively, and those high tech stocks actually saw volume at 3.4 to 1 A/D ratio, but after Netflix yesterday, that may not look the same after today's close.
The yield on the 10-year Treasury was up yet again, and it seems like we were just talking about the market being worried about a 2% yield, and yesterday it nearly hit 3% as it got as high as 2.93%.
The Dow Transportation Index, one of the more economically sensitive indices and a key market leader, recently did a swan dive off its highs and it's not very common to see a complete reversal of a move like that, so it was more likely that any rebound would be short-lived. Well, here we go. It bounced back above its 300-day average, as it did in February, and now it is quickly back up testing the 200-day EMA. What happens from here could be a huge tell for the rest of the market. If this stalls here it could be telling us not to get too excited about yesterday's rally in the major indices.
Yesterday's action was bullish, but we generally see the biggest rallies in the stock market after the biggest draw downs, and right now it is just a good start and we may have to be patient because I don't think we can count on anything just yet. Part of it could be a post tax deadline rally. We had an oversold / overly bearish set up for a relief rally, and now that we got one we probably need to see some follow through or the bears will pounce again.
The S&P 500 (C-fund) gained 1.6% yesterday and not a moment too soon as it flirted with that 200-day EMA (blue) for days and was trying to a void a 3rd straight close below it. It did close just slightly above the 50-day EMA (purple) and the descending trading channel, but the futures were lower after hours because of Netflix so I think it's premature to call it a breakout.
DWCPF (S-fund / small caps) had a big day, as small caps tend to do when there's a broad market rally, but we know how brutal the losses can be in the small caps if the market starts to give back those gains. It closed below the 50-day EMA but just above the 50-day simple average. I would still expect that open gap near 1960 to attempt to be filled, but the top of that gap could also prove to be resistance for the rally.
The EFA (I-fund) was up but another move higher in the dollar had it underperforming the U.S. indices. No break in the descending trading channel, and the open gap down near 70 is still something to keep an eye on.
BND (Bonds / F-fund) will eventually be a place to look for a bargain, but the trend is still too negative for me to get interested.
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.
