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| Today's Commentary |
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Breakout will take out stops.
Then what? Stocks rallied sharply again on Friday taking out the highs made earlier this month, and pushing the indices firmly above the descending trend line. The Dow closed up 102-points. For the TSP funds, the C-fund gained 0.82% on Friday, the S-fund jumped 1.80%, and the I-fund added 1.42%. The F-fund (bonds) dropped 0.15%. For more on the weekly and monthly returns, please see our TSP Weekly Wrap-up. The S&P 500's break above the 50 and 200-day EMA's and the descending trend line has, and will, trigger stop orders from the short side (forcing those betting on a decline to buy) and will also trigger automated breakout buy orders, so I will not be surprised to see more buying early this week. But I still don't have a good feel for what to expect looking out much further than that.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk We have a mixed picture from the indicators as the indices are getting quite overbought in the short-term, and depending on whether this is a bull or bear market (the 50 EMA being below the 200 EMA says we are "officially" in a bear, but just barely - no pun intended) so the bear market rules say investors are overly optimistic right now (bad for stocks) but if this is a bull market they are almost too pessimistic (good for stocks.) The put/call ratios are not giving us much to go on either as the readings are neutral. It's a tough call. Moving above 1100 gave the S&P 500 a higher high, but the MACD indicator shows it as a slight negative divergence as it did not make a higher high on the move. This is slightly bearish for stocks. The dollar continues to hang around the 200-day EMA and I believe whether it falls below it or not will greatly affect the direction of the stock market in the short-run. If it rebounds, stocks will likely struggle from here. If it breaks below the 200-day EMA stocks could continue to push higher.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk The seasonality charts below show us that the last week in July has a positive bias, while the first week in August has a negative bias. I usually have more to say on a Monday morning, but my mind is fresh out of ideas, speculation, predictions, and guesses. I will just be taking it day by day looking for clues. I am out of TSP transfers in July so there isn't much I can do right now anyway (100% G) and I am usually playing a long (SPY, SSO, TNA, etc.) or a short (SDS, TZA, etc.) ETF (exchange traded fund) in my IRA account(s) depending on my analysis, but right now but I am also totally in cash there as well. That could change at any time, but at the moment, I am in stalking mode waiting for more clues. Thank you for reading! We'll see you back here tomorrow. Tom Crowley |