Stocks opened sharply higher on Friday after China announced a cut in their interest rates. The world markets rejoiced on the news but as the reality of the reason for the cut sunk in - China's economy is struggling - stocks drifted lower and closed well off the highs, but still ended with decent gains. The Dow gained 91-points, about half of the opening prices.
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As expected, after getting short-changed on Thursday, the TSP gave the I-fund some payback on Friday as the fund added 0.89% on the day.
Bonds had a good day on Friday.
The SPY (S&P 500 / C-fund) blasted through the overhead resistance which I had been calling the neckline of an inverted head and shoulders pattern. So far we have not seen any right shoulder form, but Friday's action, along with the negative reversal day, was a little suspicious - plus it was an option expiration Friday, so we may get the real reaction this week.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
Are we seeing something like this, or will the SPY not form a right shoulder (RS)?
The weekly charts of the SPY shows a reversal bar. It's certainly not like the positive reversal we saw in October, but the negative reversals (red arrows) rarely are as dramatic as the positive reversals (red circles).
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Wilshire 4500 (S-fund) clearly posted a negative reversal day on Friday, and it was right at the overhead resistance line. It seems like a good time to see some selling, but will it be this week?
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Russell 2000 (small caps) bounced back up to test the double top, but resistance held, the negative reversal formed, and it is potentially forming a triple top.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The EFA (EAFE Index / I-fund) had a good day, but also reversed lower (insert broken record.) The hide and seek with the 50-day EMA continues and we'll just have to wait and see which way it eventually breaks.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The DAX had a big day, exploding up through the 200-day EMA. It didn't have a chance to reverse down since it closed well before the U.S. markets drifted lower on Friday, but there is something going on here. The question is whether this bull flag breakout is for real, or if it will eventually fail as it did in September?
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
Here is the historical performance surrounding Thanksgiving Day. The day before and the day after have been consistently strong, while the Monday after the weekend tends to be one of the weaker days of the year. Today is day (-3).
Chart provided courtesy of www.sentimentrader.com, analysis by TSP Talk
The AGG (Bonds / F-fund) has been hovering above the 50-day EMA and as long as it can stay there, they should be safe. The downside pressure has subsided this month, but is it just a pause before another leg down, or can it make another push higher? It will probably depend on what happens to stocks. It will likely do the opposite.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
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Thanks for reading! We'll see you back here tomorrow.
Tom Crowley
Posted daily at TSP Talk Market Commentary
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