Stocks followed through on Monday's reversal rally with more big gains on Tuesday. The Dow gained 476-points - off the best levels of the day, but still +1.57% on the day. We saw similar gains in the S&P 500 and Nasdaq, and small caps performed even a little better. The recently lagging Transports gained 2.2%. Bonds were down and the dollar was up.
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Both Google (Alphabet) and Amazon reported great earnings after the bell yesterday. GOOG was up sharply while AMZN, who nearly doubled estimates, was struggling some because they announced that Jeff Bezos will step down as the CEO.
These reports could give a boost to the broader market, but there's always the chance of a sell the news reaction, although the fact that stocks were selling off last week may overrule that tendency.
We did see the overhead gap in the S&P 500 chart nearly get filled yesterday, and that could be some concern as filled gaps can sometimes create resistance going forward. There was some selling into the close before that gap was completely filled, but the futures opened on the upside after the earnings announcement. There was also a gap created with Tuesday's higher open, and that is always a possible pullback target since gaps tend to get filled.
I know it's been talked about ad nauseam, but the drama of the Gamestop trading debacle continued as their stock fell 60% yesterday to $90. It had gotten near $500 just three trading days ago, but it was an $18 stock coming into 2021 so the short squeezers are still officially winning the war, but if any traders jumped into this over the last week when the hype started, they got crushed. So some of the longs were hit, and the shorts were hit, but Wall Street's hedge funds are battling back against those Reddit wallstreetbets forum traders, as we might have expected.
I don't know if this market is still considered "healthy", but the action remains positive with buying momentum still a positive factor. Last week did remind us how quickly things can turn negative and it just took a short selling squeeze by outsiders to get investors flustered. I wonder what can happen if we actually get a real problem?
Bottom line, enjoy the upside momentum, but stay on your toes. February has a way of getting in the way of a rally at some point. We've only gotten through the first two days.
Chart provided courtesy of www.sentimentrader.com
The S&P 500 (C-fund) ran up just enough to nearly fill that open gap near 3732, then reversed down but still closed with solid gains and it keeps the upside trading channel alive. A small gap opened up on Tuesday morning just above the 20-day EMA, so that's a possible downside pullback target for the next time stocks take a breather. But even if that did happen, it remains above the 20-day EMA, as you'd want to see in a bull market.
The DWCPF (small caps / S-fund) had a big day and in the process climbed back into the red rising trading channel, but I'm more interested in that blue channel since it is probably more sustainable.
The EFA (I-fund) fell below its support line last week, but it did hold at the important 50-day EMA
The Dow Jones Transportation Index rallied nicely on Tuesday and actually closed back above the 50-day EMA after what was looking like a complete breakdown when the 50-day EMA and the January 4th low was taken out last Friday.
The Volatility Index dropped another 15.5% yesterday and that was enough to pull it down below the 200-day EMA again. What a difference a couple of days can make.
BND (bonds / F-fund) was down again and the bear flag is doing its thing and my guess is that we will see that open gap near 87.00 get filled soon. But this bond chart always has me leaning the wrong way so I wouldn't bet on that.
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
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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Both Google (Alphabet) and Amazon reported great earnings after the bell yesterday. GOOG was up sharply while AMZN, who nearly doubled estimates, was struggling some because they announced that Jeff Bezos will step down as the CEO.
These reports could give a boost to the broader market, but there's always the chance of a sell the news reaction, although the fact that stocks were selling off last week may overrule that tendency.
We did see the overhead gap in the S&P 500 chart nearly get filled yesterday, and that could be some concern as filled gaps can sometimes create resistance going forward. There was some selling into the close before that gap was completely filled, but the futures opened on the upside after the earnings announcement. There was also a gap created with Tuesday's higher open, and that is always a possible pullback target since gaps tend to get filled.
I know it's been talked about ad nauseam, but the drama of the Gamestop trading debacle continued as their stock fell 60% yesterday to $90. It had gotten near $500 just three trading days ago, but it was an $18 stock coming into 2021 so the short squeezers are still officially winning the war, but if any traders jumped into this over the last week when the hype started, they got crushed. So some of the longs were hit, and the shorts were hit, but Wall Street's hedge funds are battling back against those Reddit wallstreetbets forum traders, as we might have expected.
I don't know if this market is still considered "healthy", but the action remains positive with buying momentum still a positive factor. Last week did remind us how quickly things can turn negative and it just took a short selling squeeze by outsiders to get investors flustered. I wonder what can happen if we actually get a real problem?
Bottom line, enjoy the upside momentum, but stay on your toes. February has a way of getting in the way of a rally at some point. We've only gotten through the first two days.
Chart provided courtesy of www.sentimentrader.com
The S&P 500 (C-fund) ran up just enough to nearly fill that open gap near 3732, then reversed down but still closed with solid gains and it keeps the upside trading channel alive. A small gap opened up on Tuesday morning just above the 20-day EMA, so that's a possible downside pullback target for the next time stocks take a breather. But even if that did happen, it remains above the 20-day EMA, as you'd want to see in a bull market.
The DWCPF (small caps / S-fund) had a big day and in the process climbed back into the red rising trading channel, but I'm more interested in that blue channel since it is probably more sustainable.
The EFA (I-fund) fell below its support line last week, but it did hold at the important 50-day EMA
The Dow Jones Transportation Index rallied nicely on Tuesday and actually closed back above the 50-day EMA after what was looking like a complete breakdown when the 50-day EMA and the January 4th low was taken out last Friday.
The Volatility Index dropped another 15.5% yesterday and that was enough to pull it down below the 200-day EMA again. What a difference a couple of days can make.
BND (bonds / F-fund) was down again and the bear flag is doing its thing and my guess is that we will see that open gap near 87.00 get filled soon. But this bond chart always has me leaning the wrong way so I wouldn't bet on that.
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
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.
