On any other day when the Dow closes up 1.07% (or 420-points), S&P 500 gains 1.67%, and the Nasdaq jumps 2.5%, the bulls would be ecstatic.  But at the highs yesterday the Dow was up about 1200 and the S&P was +3.4%, so the stock market lost a lot of steam as the day wore on and the gains looked vulnerable.  Profit taking in a volatile market is certainly a reasonable expectation, but the next couple of days could be very telling about whether overhead resistance is going to continue to hold and keep the 'bear' market alive, or if the bottom is in.

Daily TSP Funds Return More returns

Yes, the market movement has been headline driven, but it's more than just that.  As we pointed out yesterday, and we'll get into again today, the action is not out of the ordinary under historically similar circumstances.  That is, bottoms are a messy process and some lows hold and some fail.  It doesn't matter if it's a pandemic, a financial crisis, high inflation, or a tariff war.

It's important to try to keep emotions out of it, but good luck with that with regular 1000 point swings in the Dow.  But with the market closed we can look at the chart and see the big move up to the area we have been targeting for a possible test and resistance, which was 5500.  Yesterday the S&P rallied about 180 points to its highs, which was 5470.  That's where traders wanted to take profits, and why not in this volatile market?  

The S&P 500 (C-fund) gapped up and the pullback off the highs still left a portion of that gap open near 5300 (small red box.)  Maybe not so coincidentally, it closed within that old gap (blue) that was opened on April 4th, which has been a draw almost all month.  But there's no way to hide the trouble this chart faces near 5500, with the descending resistance continuing to hold.

    

I had mentioned that the PMO indicator was looking to cross back above its moving average, and yesterday it did just that.  Again, the 2nd crossing tends to be more bullish than the first, but that didn't work out well a few weeks ago.  Let's see if this brings in more buyers of dips going forward.

Back to the 2020 comparison.  Not that this current market is like the Covid crash, but the patterns try to tell a story, and the patterns are similar, right down to the fake out shown in April of 2020.  The headlines were flying back then as well, and whatever was happening on that fake out day, the S&P closed flat but the negative reversal in a bear market was alarming, however the bulls battled right back the next day.  Yesterday was this bear market's similar negative reversal, despite the gains.  It's getting over that resistance near 5500 that is everything right now for the bulls.

 


The action in the 10-year Treasury Yield didn't help as it opened sharply lower, but bounced back to close basically flat, and it's back near the top of a range we have been following.  It needs to calm down a little here. 

    

The dollar rallied yesterday gaining nearly 1% on the day.  That's two days in a row but the UUP is in a strong downtrend and while there are some higher upside targets, the bottom of that channel could try to act as resistance today.

We had the first Magnificent 7 stock, Tesla, report earnings on Tuesday evening, and today after the closing bell Google (Alphabet) will report.  What do these charts look like?

Tesla was up big yesterday but like most big tech stocks, it has been trending sharply lower for months, however the early March low has been tested a few times and has been holding.  It had every opportunity to break down yesterday after a disappointing report, but it also didn't make it above the descending resistance.  This is still in limbo but and the best looking chart. 
 
     

How about Google?  It too has been in a descending channel but there are some signs of life with a recent higher low, although that low won't become official unless this can make a higher high, above 165, which is also just about where the 50-day EMA is currently sitting.  Tonight's earnings report could be huge for the Mag 7 and tech market in general.

 

DWCPF (S-fund) is in the same kind of trouble that the S&P 500 is in as it failed at its crucial resistance line.  The gain was impressive so perhaps the bulls just have to be patient and not want things to improve overnight.  Otherwise, the bear have their shot again.  They did take a shot yesterday at the highs as well.

      


ACWX (I-fund) was up nicely yesterday and remains in a rising trading channel but it has been underperforming the US funds this week with the dollar rebounding.  I would assume this is going to make an attempt to test the prior highs in the not so distant future, but what will happen at a double top?

     


The BND (F-fund) had a negative reversal day despite the modest gain.  The bad news here is that the early rally came on an emotional headline, and the selling came on the market taking profits near resistance - just like the other charts.  Trump has been trying to push yields lower (bond prices higher) but something is working against that attempt lately.  Is China still selling our bonds?  Another crucial pivot point.

    

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.

Like what you're seeing on TSP Talk?  Why not Tell a Friend about us?  We'd really appreciate it, and they may too. 

Thanks!