Stocks jumped out of the starting gate on Wednesday with the indices opening gaps along the way. The Dow gained over 300-points while the broader indices did even better with the Nasdaq and small caps leading the way. Strong earnings after the bell from Dow component Disney helped push the futures even higher after the close. Bonds were up slightly as yields dipped. The dollar was down slightly.
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The S&P 500 (C-fund) jumped the shark (the purple moving average) which should be a green light to some traders and investors who would prefer to buy when the index is above that average. It seems to be in a new ascending trading channel after breaking the descending resistance line yesterday. There is an open gap below by Tuesday's high, and that's always a possible pullback target.
The DWCPF (small caps / S-fund) continues to lead on the upside after lagging for months. This chart is definitely not out of the woods yet as we might be able to categorize it as being in a bear flag unless or until it breaks above 2100 or even 2150. Right now it just looks like a strong bear market rally, and having fallen 24% from its November highs qualifies this (depending on your definition) as being in a bear market.
The EFA (I-fund) saw a huge gap up and a big gain as it moved above the key 50 and 200-day EMA's, and now it looks to test the 200 day simple moving average (green). It's in a rising channel that could be heading toward the top of that larger trading channel.
BND (Bonds / F-fund) was up and maybe due for some relief, but any rally may not last very long.
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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Bounces in a bear market or rebounds off market lows can be explosive, and that's what we're seeing now, but it doesn't necessarily mean that the bull market is back in turbo mode. I'll be looking for clues about whether this is a real bottom or a temporary bounce, but as I've said before, even if we are in a new bear market, there are always buying opportunities. You just have to be more nimble.
This morning we will get a key inflationary economic report in the CPI. This one has been a market mover of late, so is the market ready for another jolt, or is volatility finally waning?
Here's a chart of the Volatility Index and it has fallen below 20, below the 200-day EMA, and below a rising support line. I think the reaction to today's CPI could be the key to the action over the next week or so. If the VIX bounces here, we could see some backing and filling of those gaps that were opened on the index charts yesterday. If the VIX slips further below those support lines, the rally in stocks may have more to go.
The DWCPF / S-fund small to mid-cap stocks performed best yesterday. Even within the S&P 500, the stocks that are not weighted as heavily in the index performed better than the large stocks that had led the bull market after Covid, and even before that. But right now, it's the stocks that were beaten down that are acting best. How long that lasts is anyone's guess, but they are working now.
Here's that Equal Weighted S&P 500 chart, which depicts the same stocks that are within the S&P 500, but without any of the stocks being weighted more than any others. Below that is the S&P 500 weighted by the larger companies, and you can see one broke out to a higher high yesterday, and one did not.
We're seeing some good action and investor sentiment is improving as you might expect. But we'll see what happens if things keep going higher and investors get complacent. We're not at that point just yet so perhaps we can enjoy more upside for a while.
This morning we will get a key inflationary economic report in the CPI. This one has been a market mover of late, so is the market ready for another jolt, or is volatility finally waning?
Here's a chart of the Volatility Index and it has fallen below 20, below the 200-day EMA, and below a rising support line. I think the reaction to today's CPI could be the key to the action over the next week or so. If the VIX bounces here, we could see some backing and filling of those gaps that were opened on the index charts yesterday. If the VIX slips further below those support lines, the rally in stocks may have more to go.
The DWCPF / S-fund small to mid-cap stocks performed best yesterday. Even within the S&P 500, the stocks that are not weighted as heavily in the index performed better than the large stocks that had led the bull market after Covid, and even before that. But right now, it's the stocks that were beaten down that are acting best. How long that lasts is anyone's guess, but they are working now.
Here's that Equal Weighted S&P 500 chart, which depicts the same stocks that are within the S&P 500, but without any of the stocks being weighted more than any others. Below that is the S&P 500 weighted by the larger companies, and you can see one broke out to a higher high yesterday, and one did not.
We're seeing some good action and investor sentiment is improving as you might expect. But we'll see what happens if things keep going higher and investors get complacent. We're not at that point just yet so perhaps we can enjoy more upside for a while.
The S&P 500 (C-fund) jumped the shark (the purple moving average) which should be a green light to some traders and investors who would prefer to buy when the index is above that average. It seems to be in a new ascending trading channel after breaking the descending resistance line yesterday. There is an open gap below by Tuesday's high, and that's always a possible pullback target.
The DWCPF (small caps / S-fund) continues to lead on the upside after lagging for months. This chart is definitely not out of the woods yet as we might be able to categorize it as being in a bear flag unless or until it breaks above 2100 or even 2150. Right now it just looks like a strong bear market rally, and having fallen 24% from its November highs qualifies this (depending on your definition) as being in a bear market.
The EFA (I-fund) saw a huge gap up and a big gain as it moved above the key 50 and 200-day EMA's, and now it looks to test the 200 day simple moving average (green). It's in a rising channel that could be heading toward the top of that larger trading channel.
BND (Bonds / F-fund) was up and maybe due for some relief, but any rally may not last very long.
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.
