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Flat top
The Dow gained 56-points yesterday but the broader market was a little more
flat than that. It is still digesting last week's big rally and taking
a break here seems quite reasonable.
The question is, will this break in the action lead to a pullback, or is
this just a temporary pause before another move higher?
For the TSP, the C-fund added 0.14% yesterday, the S-fund
gained 0.39%, the I-fund
lost 0.69% on more strength in the dollar, and the F-fund (bonds)
was up 0.13%.
Yesterday we
talked about the flat top forming and it seems to be playing out that way.
Flat tops tend to precede declines, and even if that is true, a pullback
down to the 50-day EMA would actually be very healthy - assuming it holds.
Chart provided courtesy of
www.decisionpoint.com, analysis by TSP Talk
On a positive
note, the market leader Dow Transportation Index is apparently making a bid
to not produce a flat top. It made another new closing high yesterday
after making another all-time intraday high earlier in the day.
Chart provided courtesy of
www.decisionpoint.com, analysis by TSP Talk
If the market leader can continue to hold above the old highs
in the coming days, it will be a good sign for the S&P 500 and the rest of
the market. And with the overnight futures up solidly while I write
this, it is possible that the S&P takes out the flat top resistance before
we see a pullback.
The I-fund lost 0.69% yesterday and once again the strength in the dollar is
one of the main catalysts for the loss. The dollar is testing the
upper end of the current pennant formation in the chart.
Chart provided courtesy of
www.decisionpoint.com, analysis by TSP Talk
Fundamentally, the dollar has some issues but the end of QE2 helped it form
at least a short-term bottom back at the end of April. It is also the
continued economic woes in Europe that has
been helping the dollar stay buoyant. It is relative. The dollar
is strengthening against some of the weak currencies in Europe, although the
Euro is still hanging tough.
The fact that U.S. stocks have not rolled over in the last two days, despite
the dollar rally, is another good sign. Seeing U.S. stocks rally while
the dollar rallies would be a great situation for investors. But the
I-fund would be less attractive in comparison if that happens.
Tomorrow we get the June jobs report.
Estimates are for a gain of 110,000 jobs and an unemployment rate of 9.1%.
Thanks for reading! We'll see you back here tomorrow. Tom Crowley
Click here to discuss today's Market Commentary
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