Stocks opened lower but once again the dip buyers showed up, and the bears seem to be nowhere in sight - at least in the large caps recently. We saw modest gains in the big three indices and the S&P 500 closed at another new high. However, yesterday it was the small caps and the I-fund that pulled back the hardest. Yields ended the day slightly lower giving the F-fund a gain on the day.
Here are those charts showing the new highs in the S&P 500, and the Nasdaq on the brink of doing the same, and I really like the look of that cup and handle formation on the S&P 500 chart. It has already moved up 450 points since the election, and about 375 since the January low but it has since consolidated nicely, creating that handle. But as I pointed out yesterday, we're seeing some signs of extremes that may or may not be a deal-breaker, and the seasonality warning has yet to pan out, unless you are a small cap stocks.
The small caps of the S-fund (above) have had a good year but they've been stalling a bit lately and are still well off their post-election highs. That looks like a potential bull flag coming off the January lows, but a recent move higher in yields over the last few months when inflation concerns began again, may have kept investors from fully committing to the interest rate sensitive small caps.
You can see that move higher in the 10-year Treasury Yield since the December low, but it has been consolidating mostly sideways since just before Christmas.
The battle between inflation and growth may keep small caps volatile. They probably have the most potential this year, but if inflation stays sticky, that potential may be fleeting. Keep an eye on this 10-year Yield chart. If it can get below about 4.5% and trend lower or even stay flat, the small caps may start reaching for those old highs.
The S&P 500 (C-fund) made new highs again yesterday as it fills out that bullish cup and handle formation. As much talk as we have done about the market broadening out, here is the large cap index leading the way again. This could be a resistance area and perhaps we see a modest pullback, but the dip buyers have remained resilient. As I pointed out yesterday regarding money managers and low cash levels, this could be a trap. It's really not an easy time to trade. The chart looks really good but breakouts can often bring profit takers creating fake outs.
ACWX (the I-fund tracking index) pulled back sharply yesterday, so for anyone who has been looking for an opportunity to buy a dip in the I-fund, we may be finally seeing one. Since the lows in early January, we've only seen one or two day pullbacks before it shot back up. This could fall all the way down to 55 and still be in good shape.
BND (F-fund) moved back above the top of the channel with the 0.14% gain yesterday, and this back and forth continues. It's above the 50 and 200-day moving averages, while it has been consolidating those January gains most of February. Not bad.
Thanks so much for reading! We'll see you back here tomorrow.
Tom Crowley
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
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With small and mid-caps lagging yesterday, the advance / decline numbers were slightly on the negative side and the ratio of 52-week highs to 52-week lows is not as lopsided on the high side as you might expect with the S&P 500 and Nasdaq at or flirting with all time highs.
Here are those charts showing the new highs in the S&P 500, and the Nasdaq on the brink of doing the same, and I really like the look of that cup and handle formation on the S&P 500 chart. It has already moved up 450 points since the election, and about 375 since the January low but it has since consolidated nicely, creating that handle. But as I pointed out yesterday, we're seeing some signs of extremes that may or may not be a deal-breaker, and the seasonality warning has yet to pan out, unless you are a small cap stocks.
The small caps of the S-fund (above) have had a good year but they've been stalling a bit lately and are still well off their post-election highs. That looks like a potential bull flag coming off the January lows, but a recent move higher in yields over the last few months when inflation concerns began again, may have kept investors from fully committing to the interest rate sensitive small caps.
You can see that move higher in the 10-year Treasury Yield since the December low, but it has been consolidating mostly sideways since just before Christmas.
The battle between inflation and growth may keep small caps volatile. They probably have the most potential this year, but if inflation stays sticky, that potential may be fleeting. Keep an eye on this 10-year Yield chart. If it can get below about 4.5% and trend lower or even stay flat, the small caps may start reaching for those old highs.
The S&P 500 (C-fund) made new highs again yesterday as it fills out that bullish cup and handle formation. As much talk as we have done about the market broadening out, here is the large cap index leading the way again. This could be a resistance area and perhaps we see a modest pullback, but the dip buyers have remained resilient. As I pointed out yesterday regarding money managers and low cash levels, this could be a trap. It's really not an easy time to trade. The chart looks really good but breakouts can often bring profit takers creating fake outs.
ACWX (the I-fund tracking index) pulled back sharply yesterday, so for anyone who has been looking for an opportunity to buy a dip in the I-fund, we may be finally seeing one. Since the lows in early January, we've only seen one or two day pullbacks before it shot back up. This could fall all the way down to 55 and still be in good shape.
BND (F-fund) moved back above the top of the channel with the 0.14% gain yesterday, and this back and forth continues. It's above the 50 and 200-day moving averages, while it has been consolidating those January gains most of February. Not bad.
Thanks so much for reading! We'll see you back here tomorrow.
Tom Crowley
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
Questions, comments, or issues with today's commentary? We can discuss it in the Forum.
Daily Market Commentary Archives
For more info our other premium services, please go here... www.tsptalk.com/premiums.php
To get weekly or daily notifications when we post new commentary, sign up HERE.
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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