A tremendous 4-day rally was capped off on Friday with another 1% to 2% rally in the indices, cutting into the hefty 2022 losses, and getting the bulls excited about the prospect that the correction may be over. The Dow gained 274-points while the Nasdaq and the small caps led. Even bonds had a good day. The Dow Transports didn't participate but they were coming off a monster 3-day rally.
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The TSP stock charts showed some progress and the C-fund index (S&P 500) and S-fund (DWCPF) both pushed above their descending resistance lines, which could open the door for more buyers to step up. "Could" is the key word because that is not always the case.
The I-fund (EFA) remains below resistance despite the big bounce.
Being that we were flirting with bear market like declines, I decided to take a look at the chart of the S&P 500 in the early stages of the 2007 - 2009 bear market and yes, we saw a few failed breakouts before the downside resumed. Not that we are in a 2008-like bear market right now, it's too early to say, but it's certainly not out of the question with interest rate hikes just getting started, inflation getting out of control, no end in sight to the geopolitical chaos, and oil recently hitting $130 a barrel this month, something it hadn't done since... 2008.
So breaking above resistance is something, but it's not everything. We'll look at the moving averages in charts down below.
As I've talked about before, bear market rallies can be explosive, and we got a taste of that last week. They can also last for weeks, or even months, so perhaps this rally has some legs, but this coming week has some issues on the seasonality chart, and it has to do with the post options / futures expiration.
The Volatility Index improved greatly last week but you can see where it ended the week - just above some key support. Being above the 200-day EMA means the swings may continue to be wide, but last week showed us that those swings can be to the upside as well.
So we have some bullish setups, and a few bearish, so I don't think the bears nor the bulls can come into this week with a lot of confidence. The public may be growing numb to the daily war news headlines, but they will probably keep coming.
The S&P 500 (C-fund) moved higher for a 4th straight day on Friday, capping off a big week for stocks. It has erased March's losses in those four days, blasting right through the 200 and 50-day EMAs. Impressive, but it got a boost from the quadruple witching expiration week's bullish bias, but this week it will have to deal with the post expiration bearish bias, which has historically been quite tough on stocks. We'll see. The bulls now have some momentum and at this point they have to deal with the barrage of negative headlines that we've been seeing.
The DWCPF (small caps / S-fund) closed above its 50-day EMA after another big gain. That 1800 area has held three times in the last few weeks so it is really trying to establish a bottom. Getting above that 50 day EMA is another good step, but this is still considered a bear market with that 50-day average below the slower moving averages. Bear market rallies can be big, so I think it's too early to make any bottom calls here.
The EFA (I-fund) followed the U.S. indices higher but this one hasn't made it above the moving averages yet. It may not be long before we find out if this was a bear market rally that fails, or if the bulls have the momentum to break the downtrend.
BND (Bonds / F-fund) rallied on Friday pushing it off of Wednesday's lows, but it is now up against the top of one of the descending trading channels. Still due for a bounce, but the trend is down so I would get too married to any long bond positions.
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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We came into this week with the S&P 500 ETF SPY at 420.07, and we saw that the bulk of those options contract targets were much higher and would expire worthless if the S&P 500 didn't move up quite a bit, so we thought investors might try to push the SPY up toward those targets. It didn't quite get to the largest open interest contract positions, but it did close at 444.52 for gain near 6% for the week, so it was quite the effort from the bulls.
Now that the expiration week is behind us, there is a tendency to see a bit of an exhale during the post expiration week, as the urgency to get the March call options in the money, is over. There are certainly enough headwinds out there to cause that, so the bulls have some work to do to follow up on last week's big gains.
The rally on Thursday and Friday seemed to ignore the fact that oil was moving back over $100 a barrel as it bounced off support. There's some possible resistance near 108 but I would think that a move above that resistance would give the bears some fodder to start selling again.
Now that the expiration week is behind us, there is a tendency to see a bit of an exhale during the post expiration week, as the urgency to get the March call options in the money, is over. There are certainly enough headwinds out there to cause that, so the bulls have some work to do to follow up on last week's big gains.
The rally on Thursday and Friday seemed to ignore the fact that oil was moving back over $100 a barrel as it bounced off support. There's some possible resistance near 108 but I would think that a move above that resistance would give the bears some fodder to start selling again.
The TSP stock charts showed some progress and the C-fund index (S&P 500) and S-fund (DWCPF) both pushed above their descending resistance lines, which could open the door for more buyers to step up. "Could" is the key word because that is not always the case.
The I-fund (EFA) remains below resistance despite the big bounce.
Being that we were flirting with bear market like declines, I decided to take a look at the chart of the S&P 500 in the early stages of the 2007 - 2009 bear market and yes, we saw a few failed breakouts before the downside resumed. Not that we are in a 2008-like bear market right now, it's too early to say, but it's certainly not out of the question with interest rate hikes just getting started, inflation getting out of control, no end in sight to the geopolitical chaos, and oil recently hitting $130 a barrel this month, something it hadn't done since... 2008.
So breaking above resistance is something, but it's not everything. We'll look at the moving averages in charts down below.
As I've talked about before, bear market rallies can be explosive, and we got a taste of that last week. They can also last for weeks, or even months, so perhaps this rally has some legs, but this coming week has some issues on the seasonality chart, and it has to do with the post options / futures expiration.
The Volatility Index improved greatly last week but you can see where it ended the week - just above some key support. Being above the 200-day EMA means the swings may continue to be wide, but last week showed us that those swings can be to the upside as well.
So we have some bullish setups, and a few bearish, so I don't think the bears nor the bulls can come into this week with a lot of confidence. The public may be growing numb to the daily war news headlines, but they will probably keep coming.
The S&P 500 (C-fund) moved higher for a 4th straight day on Friday, capping off a big week for stocks. It has erased March's losses in those four days, blasting right through the 200 and 50-day EMAs. Impressive, but it got a boost from the quadruple witching expiration week's bullish bias, but this week it will have to deal with the post expiration bearish bias, which has historically been quite tough on stocks. We'll see. The bulls now have some momentum and at this point they have to deal with the barrage of negative headlines that we've been seeing.
The DWCPF (small caps / S-fund) closed above its 50-day EMA after another big gain. That 1800 area has held three times in the last few weeks so it is really trying to establish a bottom. Getting above that 50 day EMA is another good step, but this is still considered a bear market with that 50-day average below the slower moving averages. Bear market rallies can be big, so I think it's too early to make any bottom calls here.
The EFA (I-fund) followed the U.S. indices higher but this one hasn't made it above the moving averages yet. It may not be long before we find out if this was a bear market rally that fails, or if the bulls have the momentum to break the downtrend.
BND (Bonds / F-fund) rallied on Friday pushing it off of Wednesday's lows, but it is now up against the top of one of the descending trading channels. Still due for a bounce, but the trend is down so I would get too married to any long bond positions.
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.
