Stocks opened higher on Friday, drifted lower for much of the day but closed strong, especially in the S&P 500, where it closed at the highs of the day to post yet another new all time high. The Dow was negative until a few minutes before the close where it moved up enough to push it into positive territory. The I-fund led the way thanks to a sell off in the dollar, and the small caps lagged posting a moderate loss so the tale of two markets continues. Bonds also rallied as yields declined after a weaker than expected consumer sentiment report.
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Whether it's COVID's revival, the price of gasoline or other things getting too high (housing, rents, food, etc.), I'm not sure, but consumer confidence didn't look all that good in the recent University of Michigan Consumer Sentiment Index for July, which came in at 70.2.
Expectations were looking for a reading of 81.6 after the June Index was 81.2.
Sometimes extreme low readings are signs that things are about to turnaround, but things have already turned around economically, so again, I'm not sure what to make of this. What is the consumer worried about? Of course if you watch the news every night you'd be worried about everything.
One thing this weak sentiment data did was reverse the rally in the 10-year yield and the dollar. The 10-year fell back below those key moving averages and seems to have its sights set on that open gap.
The dollar rolled over and is also in the process of trying to fill an open gap, but will the support areas on the chart hold up? This sharp move lower helped the I-fund lead the way on Friday.
We're due for a pullback but investors see new highs every day. They hate to miss out and that has meant that every minor dip has been bought. We haven't had a 5% pullback in the S&P 500 in about 10 months - something we typically see a few times each year. History tells us what we should expect a 10% correction about once each year.
The S&P 500 (C-fund) made another new high - alert the press! Oh, wait! That's all they're talking about. What they aren't talking about is some of the internal issues we see in many indicators, or that resistance is overhead and the risk / reward for being stocks is getting closer and closer to very risky. For giggles, if we did get the elusive 5% pullback from this current level, the S&P 500 would have to go down to 4245.
The DWCPF (S-fund) has been in idle mode for the last 4 weeks, despite the volatility during that time. It has held above the 50-day EMA, which is a bullish sign, but that resistance line has been stubbornly resilient in holding it below 2250 on a closing basis. It hasn't closed above that resistance line since it made new highs right before the 4th of July. And as you can see, the resistance line is coming off peaks that were above 2250 so the S-fund has been moving sideways and is still below those peaks that go back to February.
The EFA (EAFE Index / I-fund) had an excellent day on Friday as the dollar tumbled a half of a percent. Now it's testing that old high and the double top situation I have been talking about, is finally, and potentially, at hand.
I continue to wonder how well the I-fund can do if Japan, the largest holding in the I-fund, continues to trend lower and fail at resistance. Late last week it backed off from the 50-day EMA again.
The Dow Transportation Index posted another gain, making it four in a row and it remains above those key moving averages, which it overtook last week. The chart below that goes back 6-months and we can see that it is technically still in its downtrend, and the resistance line is in this current area.
The BND (bonds / F-fund) had a big day on Friday after the weak consumer confidence report. The 50-day EMA held nicely, but it could potentially find resistance at the top of the old channel. We'll see, but there is also an open gap near 86.60 that could draw attention.
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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Whether it's COVID's revival, the price of gasoline or other things getting too high (housing, rents, food, etc.), I'm not sure, but consumer confidence didn't look all that good in the recent University of Michigan Consumer Sentiment Index for July, which came in at 70.2.
Expectations were looking for a reading of 81.6 after the June Index was 81.2.
Sometimes extreme low readings are signs that things are about to turnaround, but things have already turned around economically, so again, I'm not sure what to make of this. What is the consumer worried about? Of course if you watch the news every night you'd be worried about everything.
One thing this weak sentiment data did was reverse the rally in the 10-year yield and the dollar. The 10-year fell back below those key moving averages and seems to have its sights set on that open gap.
The dollar rolled over and is also in the process of trying to fill an open gap, but will the support areas on the chart hold up? This sharp move lower helped the I-fund lead the way on Friday.
We're due for a pullback but investors see new highs every day. They hate to miss out and that has meant that every minor dip has been bought. We haven't had a 5% pullback in the S&P 500 in about 10 months - something we typically see a few times each year. History tells us what we should expect a 10% correction about once each year.
The S&P 500 (C-fund) made another new high - alert the press! Oh, wait! That's all they're talking about. What they aren't talking about is some of the internal issues we see in many indicators, or that resistance is overhead and the risk / reward for being stocks is getting closer and closer to very risky. For giggles, if we did get the elusive 5% pullback from this current level, the S&P 500 would have to go down to 4245.
The DWCPF (S-fund) has been in idle mode for the last 4 weeks, despite the volatility during that time. It has held above the 50-day EMA, which is a bullish sign, but that resistance line has been stubbornly resilient in holding it below 2250 on a closing basis. It hasn't closed above that resistance line since it made new highs right before the 4th of July. And as you can see, the resistance line is coming off peaks that were above 2250 so the S-fund has been moving sideways and is still below those peaks that go back to February.
The EFA (EAFE Index / I-fund) had an excellent day on Friday as the dollar tumbled a half of a percent. Now it's testing that old high and the double top situation I have been talking about, is finally, and potentially, at hand.
I continue to wonder how well the I-fund can do if Japan, the largest holding in the I-fund, continues to trend lower and fail at resistance. Late last week it backed off from the 50-day EMA again.
The Dow Transportation Index posted another gain, making it four in a row and it remains above those key moving averages, which it overtook last week. The chart below that goes back 6-months and we can see that it is technically still in its downtrend, and the resistance line is in this current area.
The BND (bonds / F-fund) had a big day on Friday after the weak consumer confidence report. The 50-day EMA held nicely, but it could potentially find resistance at the top of the old channel. We'll see, but there is also an open gap near 86.60 that could draw attention.
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.
