TSP Talk Blog

Stocks opened strongly on Monday, and the bears were no where to be found. The Dow gained 176-points on the day, which seemed to be a little make up from Friday's geopolitical sell-off.

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The S-fund led the way and bonds were were down. The I-fund did well but lagged the U.S. indices.

The SPY (S&P 500 / C-fund) is above the major EMAs that we watch and it looks pretty bullish. Yesterday's rally was on fairly light volume as many of the bigger money managers on Wall Street may still be vacationing. A gain is a gain, but it will be interesting to see what happens when the big money returns. You can see that the recent largest volume bars are all red.


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

The Nasdaq 100 has been relentless. It held up well during the pullback, and the relative strength continued on the rebound as the QQQ easily broke through the old highs yesterday.


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

The Wilshire 4500 (S-Fund) had a big day as small caps led the way up. Can it be this easy? Should investors have bought the breakout and just waited for new highs? Possibly. But easy money isn't always that easy.


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

The Russell 2000 has traded in a large range between about 1085 and 1215 this year. Here it is sitting about in the middle of the two so I looked for prior chart formations to see if it gives us any clues to which side it will run from here.

The current action looks like another "V" bottom, and we've become quite accustomed to those over the last few years. But the last two definite "V" formations actually resulted in two different outcomes. The one in February broke out to the upside, while the one in April broke down to new lows. There's actually a few smaller "V"s that I didn't mark that also broke down, so I don't know if this rally is quite the slam dunk as it might seem. At least for the small caps.


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

The IEF Bond ETF was down sharply, but it did remain above its breakout point. After a clean cup and handle formation breakout, it came back to test the breakout level, then resumed the rally. That's pretty bullish action so it seems that the bond traders are either anticipating weak economic data, or they are playing it safe with the geopolitical events still rumbling.


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


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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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