It was the Janet Yellen show on Wall Street yesterday as stocks opened moderately lower, but as soon as Ms. Yellen stepped behind the microphone, stocks blasted off and never looked back. The gains were not huge, less than 1% (although small caps and the I-fund had big days), but the reversal was impressive. The Dow gained 98-points while the S&P 500 added 0.88%. Bonds were also up as the AGG broke out to new highs.
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As we have been saying for years, the market has become addicted to low rates and easy money, and this goes back to 2007 when large investment banks started to go belly up.
These are actual quotes from Yellen's speech:
"In other respects, economic and financial conditions remain less favorable than they did back at the time of the December FOMC meeting."
"In particular foreign economic growth now seems likely to be weaker than this year than previously expected, and earnings expectations have declined."
Yet stocks rallied. Is this irrational exuberance or is this just the new market which depends almost 100% on the projected next move in interest rates, because Yellen basically took more rate hikes off the table for 2016.
On Friday morning we get the March jobs report and estimates are looking for a gain of 200,000 jobs, and an unemployment rate of 4.9%. The Jobs Report Contest is now open in the forum. Click here for more info.
The S&P 500 / C-Fund rallied back up to the descending resistance line off the November high, and is also back testing the middle of the head of the head and shoulders pattern. It is looking more and more like it wants to breakout but many of our intermediate-term indicators are stretched to the upside so the question is whether it has the strength at this point.
Head test of the head and shoulders pattern:
The DWCPF (Dow Completion Index / Small Caps) had a big day gaining nearly 2% yesterday and it is back testing the 200-day EMA, and also the descending resistance line off of the 2015 highs.
The Dow Transportation Index held again at the 200-day EMA so the bullish case here continues to strengthen, as long as the support is holding.
The Dollar plummeted on Janet Yellen's comments, which is what you might expect when it looks like money will remain cheap. The 50-day EMA is now below the 200-day EMA and the dollar is looking quite bearish for now.
The EFA (EAFE Index / I-fund) is generally helped when the dollar dips and we saw a 1% gain yesterday. The 50-day EMA held on the recent pullback, which is always a positive sign, but now it is back testing the old support line that broke down last week.
The price of oil was down yesterday despite the weakness in the dollar. That's not a very bullish sign for oil. The 200-day EMA remains the peak of the recent rally. The question is, will the 20-day EMA and the old resistance line now hold as support? That would be a good technical place for any pullback to reverse so it's a good test for oil going forward.
The AGG (Bonds / F-fund) finally broke out with the help of Janet Yellen telling everyone that interest rates will likely not go up again this year. Bond prices (and the F-fund) go up when yields fall.
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
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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The reaction was instant and the dollar dropped sharply while stocks and commodities, particularly gold, rallied. Oil bounced as well but it could not hold those gains and closed down 2%.[TABLE="width: 89%, align: center"]
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As we have been saying for years, the market has become addicted to low rates and easy money, and this goes back to 2007 when large investment banks started to go belly up.
These are actual quotes from Yellen's speech:
"In other respects, economic and financial conditions remain less favorable than they did back at the time of the December FOMC meeting."
"In particular foreign economic growth now seems likely to be weaker than this year than previously expected, and earnings expectations have declined."
Yet stocks rallied. Is this irrational exuberance or is this just the new market which depends almost 100% on the projected next move in interest rates, because Yellen basically took more rate hikes off the table for 2016.
On Friday morning we get the March jobs report and estimates are looking for a gain of 200,000 jobs, and an unemployment rate of 4.9%. The Jobs Report Contest is now open in the forum. Click here for more info.
The S&P 500 / C-Fund rallied back up to the descending resistance line off the November high, and is also back testing the middle of the head of the head and shoulders pattern. It is looking more and more like it wants to breakout but many of our intermediate-term indicators are stretched to the upside so the question is whether it has the strength at this point.
Head test of the head and shoulders pattern:
The DWCPF (Dow Completion Index / Small Caps) had a big day gaining nearly 2% yesterday and it is back testing the 200-day EMA, and also the descending resistance line off of the 2015 highs.
The Dow Transportation Index held again at the 200-day EMA so the bullish case here continues to strengthen, as long as the support is holding.
The Dollar plummeted on Janet Yellen's comments, which is what you might expect when it looks like money will remain cheap. The 50-day EMA is now below the 200-day EMA and the dollar is looking quite bearish for now.
The EFA (EAFE Index / I-fund) is generally helped when the dollar dips and we saw a 1% gain yesterday. The 50-day EMA held on the recent pullback, which is always a positive sign, but now it is back testing the old support line that broke down last week.
The price of oil was down yesterday despite the weakness in the dollar. That's not a very bullish sign for oil. The 200-day EMA remains the peak of the recent rally. The question is, will the 20-day EMA and the old resistance line now hold as support? That would be a good technical place for any pullback to reverse so it's a good test for oil going forward.
The AGG (Bonds / F-fund) finally broke out with the help of Janet Yellen telling everyone that interest rates will likely not go up again this year. Bond prices (and the F-fund) go up when yields fall.
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
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.
