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Rally Friday keeps weekly streak alive

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After Thursday's wild up and down day that was triggered by the ECB stimulus announcement, the bulls made a stand on Friday and took what looked like was going to be a losing week, and turned it into a fourth straight weekly gain for the major indices. The Dow gained 218-points on Friday and the bears, who have been counting on a bear market rally peak, now have their backs against the wall as we start seeing some of the overhead resistance getting breached.

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Oil has led the rally higher as the rising support line off the lows has held and remains intact. There is a little resistance in the 38.50 area, and the support at 38.00 may give it a good battle.




After last week's ECB stimulus, this week we'll find out what the Bank of Japan and the Federal Reserve have up their sleeves. They seem to rarely disappoint investors but we know the Fed has painted themselves in a bit of a corner so we'll see how creative they can be.

The S&P 500 (C-Fund) cut through the 200-day EMA (exponential) and closed just north of the 200-day SMA (simple). There's a lot of resistance in this current area (2020-2025), although this market has not been phased by resistance of late. There is also a small open gap near 2045 that could be an upside target.




The weekly chart of the S&P 500 shows a break back above the 50-week EMA.




The longer-term daily chart shows the head and shoulders pattern that we have been watching. We could be seeing the head test and that could also be an upside target. A head test is not the most common outcome of a head and shoulder, but once we started to rally off the neckline of the H&S, it became more likely. If the upside does hit trouble in this area, it would not be a big surprise to see some strong resistance there. Just enough to keep investors off balance.



The small caps (Dow Completion Index / S-fund) saw a big jump on Friday and it needed all of that 2.2% gain to take it into positive territory for the week. The 0.66% gain last week was about half that of the C and I-funds. It remains below the 200-day EMA.




The Dow Transportation Index is also about to make a second test of the 200-day EMA after failing earlier this month. Between this chart and the small caps, we could be looking at the largest test for success or failure at the 200-day EMA and which way they go could be the biggest tell for the market overall.




The Nasdaq 100 (QQQ) popped its head above the 200-day EMA on Friday (although it is still be low the 200-day SMA - not shown) and a breakout here could be an inverted head and shoulders breakout. The significance of that would be an upside target near 113 - but it has to hold above that breakout area first.




The EFA (EAFE Index / I-fund) filled another open gap with Friday's rally. There is another big open gap just below 59 - and that is also where the 200-day EMA sits so that could be an upside target, but it could also turn into strong resistance if it gets there.




The AGG (Bonds / F-fund) was down on Friday as stocks rallied. The bullish pennant formation remains intact so we'll have to see if the support above 109+ can hold.




Administrative Note: The March Madness Tournament Contest has started in the forum so if you have any interest in join in, take a look. It's free and there are prizes for the top picks.
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Thanks for reading. We'll see you back here tomorrow.

Tom Crowley



Posted daily at www.tsptalk.com/comments.php

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Comments

  1. amoeba's Avatar
    Two out of three equity fund indices with gaps above = hold for me. F-fund has little reason to go anywhere but sideways at best. Hoping to catch F-fund soon and move up the tracker.

S&P500 (C Fund) (delayed)

(Stockcharts.com Real-time)
DWCPF (S Fund) (delayed)

(Stockcharts.com Real-time)
EFA (I Fund) (delayed)

(Stockcharts.com Real-time)
BND (F Fund) (delayed)

(Stockcharts.com Real-time)

Yahoo Finance Realtime TSP Fund Tracking Index Quotes