Some morning weakness turned into another afternoon rally, but the gains were modest as the indices continue to grind in a narrow range that has lasted all of April and May. The Dow gained 48-points but spent more than half the day in negative territory, and once again we got a positive reversal day out of it. That's four positive reversals in a row, whatever that is trying to tell us. It sounds bullish, but it could also be a set up. Small caps led as regional banks rallied. Bonds were down as yields moved up.
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The market continues to hang tough and is basically climbing that wall of worry, or at least moving sideways for many weeks now rather than rolling over in the face of the economic concerns. Janet Yellen reiterated the June 1st deadline for the debt ceiling yesterday, while others believe it's not quite that soon. Whenever it is we will all be forced to watch the dramatics in Washington as each party points fingers at the other about why a deal is not getting done. This is how politicians get attention, but we all know that a "ceiling" is a joke since it is constantly raised, so spare us the dramatics and get it done!
Besides the debt ceiling deadline, the overall outlook look for financial markets is concerning, but certain sectors of the stock market are still performing quite well. Large caps are holding up but being held hostage, if you will, by a small group of heavily weighted tech stocks that could make or break the market.
The small caps are not being held up by those tech stocks like the S&P 500 and it shows in their charts, whether it's the Russell 2000 or the DWCPF (aka Dow Completion Index) which is what the TSP S-fund is tracking. Both of these charts are at crucial levels and again won't be helped by the Apples and Amazons of the world. It's the regional banks and maybe the smaller oil refinery type stocks that will make or break these indices.
The DWCPF (S-fund) is back up against some stubborn resistance where the 50-day EMA is meeting an old horizontal support / resistance line (blue) that seems to have some significance.
If we look at a longer term chart of those small caps indices we can see that the highs before the COVID crash have been holding as support fairly well, particularly on the Russell, but the bulls don't want to see this continuously knocking on that support line door because too many tests could see the trap door open. The downtrends have been broken as well, but unfortunately, because there was no "V" bottom and sustained rally off the lows, they now have big bearish looking flags on them.
Yields were up, pushing the F-fund down, but now the 10-year is back up against resistance and at the 50-day EMA.
The dollar was down, retracing some of last week's big gains, and that helped the I-fund to a nice gain yesterday.
The S&P 500 (C-fund) put in yet another positive reversal day, and did so without making much progress as it has traded within the tight range of 4100 to about 4150 for the last four days. The sideways action is likely coiling up for a bigger move at some point, but what will be the trigger? The debt ceiling deadline? A budget debt deal? The June Fed meeting? A geopolitical event or any kind of headline? I'm not sure, but at some point a bullish or bearish fuse will be lit and break this logjam.
The EFA (I-fund) had a good day with the help of a decline in the dollar. The consolidation continues here as well with 72.50 looking like the bulls support line in the sand between another leg higher, and a decline that fills some of those gaps. The bears are trying to hold the top of the recent range near 74 area as resistance.
BND (Bonds / F-fund) gapped down yesterday as yields moved up. This puts BND right on top of its 50-day EMA and the bottom of the flag formation. F-flags are a little troubling but the outlook for bonds seems good if the Fed is done tightening and the economy is flirting with a recession.
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 so much 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 market continues to hang tough and is basically climbing that wall of worry, or at least moving sideways for many weeks now rather than rolling over in the face of the economic concerns. Janet Yellen reiterated the June 1st deadline for the debt ceiling yesterday, while others believe it's not quite that soon. Whenever it is we will all be forced to watch the dramatics in Washington as each party points fingers at the other about why a deal is not getting done. This is how politicians get attention, but we all know that a "ceiling" is a joke since it is constantly raised, so spare us the dramatics and get it done!
Besides the debt ceiling deadline, the overall outlook look for financial markets is concerning, but certain sectors of the stock market are still performing quite well. Large caps are holding up but being held hostage, if you will, by a small group of heavily weighted tech stocks that could make or break the market.
The small caps are not being held up by those tech stocks like the S&P 500 and it shows in their charts, whether it's the Russell 2000 or the DWCPF (aka Dow Completion Index) which is what the TSP S-fund is tracking. Both of these charts are at crucial levels and again won't be helped by the Apples and Amazons of the world. It's the regional banks and maybe the smaller oil refinery type stocks that will make or break these indices.
The DWCPF (S-fund) is back up against some stubborn resistance where the 50-day EMA is meeting an old horizontal support / resistance line (blue) that seems to have some significance.
If we look at a longer term chart of those small caps indices we can see that the highs before the COVID crash have been holding as support fairly well, particularly on the Russell, but the bulls don't want to see this continuously knocking on that support line door because too many tests could see the trap door open. The downtrends have been broken as well, but unfortunately, because there was no "V" bottom and sustained rally off the lows, they now have big bearish looking flags on them.
Yields were up, pushing the F-fund down, but now the 10-year is back up against resistance and at the 50-day EMA.
The dollar was down, retracing some of last week's big gains, and that helped the I-fund to a nice gain yesterday.
The S&P 500 (C-fund) put in yet another positive reversal day, and did so without making much progress as it has traded within the tight range of 4100 to about 4150 for the last four days. The sideways action is likely coiling up for a bigger move at some point, but what will be the trigger? The debt ceiling deadline? A budget debt deal? The June Fed meeting? A geopolitical event or any kind of headline? I'm not sure, but at some point a bullish or bearish fuse will be lit and break this logjam.
The EFA (I-fund) had a good day with the help of a decline in the dollar. The consolidation continues here as well with 72.50 looking like the bulls support line in the sand between another leg higher, and a decline that fills some of those gaps. The bears are trying to hold the top of the recent range near 74 area as resistance.
BND (Bonds / F-fund) gapped down yesterday as yields moved up. This puts BND right on top of its 50-day EMA and the bottom of the flag formation. F-flags are a little troubling but the outlook for bonds seems good if the Fed is done tightening and the economy is flirting with a recession.
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 so much 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.
