TSP Talk Blog

Stocks closed higher on Friday, but it wasn't an easy day. After an early 125-point gain turned into a 50-point loss, the Dow rallied into the close ending the day up 49-points. Small caps lagged, and the I-fund led the way as the dollar broke down. Bonds were flat.

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Looking at the futures, we can see the stock market may be reacting now to what the bond market was trying to tell us last week. The S&P 500 futures are down almost 1% as I write this Sunday night, and that is right on a support line on the futures chart, so it's possible we may have seen the lows, but if not, the pullback may be beginning.

The SPY (S&P 500) hit new highs last week but it looks like those high are in jeopardy if the weak overnight futures hold. The short-term rising trading channel is also in jeopardy and that may be the sign to step aside for a while. As I mentioned on Friday, often the first day of a new month reverses the direction of a big move the prior month, and February was a big month.


Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

As the S&P 500 moved into new high territory, and it will have to defy the trend we saw in 2013 keep moving higher. That is, 3 of the 4 breakouts in the last year reversed back down below the breakout point and eventually produced a significant pullback before resuming the upside action. Only the breakout in October held above its breakout point.


Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

The Dow is finally closing in its late 2013 high, but connecting the recent peaks shows the resistance may be closer to 164 on the Dow ETF. It also finally filled the open gap from January.


Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

The Nasdaq 100 (QQQ) produced an outside day on Friday. It wasn't a negative outside day where it would have had to close below Thursday's low, but outside days could mean a reversal in the trend is coming.


Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

The I-fund led the way on Friday as the dollar broke down from its bear flag, and also fell below the bottom of its 3-month trading channel. A large gap was opened on the breakdown, so we could see a snap-back rally soon, but this is a technical breakdown unless it can recapture the 21.45 level. If this breakdown holds, the I-fund will benefit and probably outperform the C and S funds. not everyday, but in general.


Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

Bonds were flat on Friday but they continue to show some concern, and I assume it has to do with the situation in the Ukraine. How much that will affect our stock market remains to be seen, but as I said last week, the bond traders are generally more savvy than the stock market traders, and something is bugging them.


Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

We get the March jobs report this coming Friday and right now estimates are looking for a gain of about 163,000 jobs, and an unemployment rate of 6.6%.

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Thanks for reading! We'll see you back here tomorrow.

Tom Crowley


Posted daily at TSP Talk Market Commentary

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