TSP Talk Blog

Friday was a bit of a mixed bag but the large cap indices continued their positive ways with modest gains - particularly the Nasdaq, and the international stocks had a big day with the dollar breaking down. But the small caps lagged giving back some of the recent gains. The Dow gained 21-points.

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The dollar fell below some key support helping the I-fund lead the way, and bonds posted a small gain.

Today after the close, Apple posts their first quarter earnings report, and that could be a market mover.

The SPY (S&P 500 / C-fund) posted a small gain on Friday and the key for this index is remaining above the breakout resistance line, which should now act as support if it is a healthy breakout. The consolidation has been a long one so it looks real to me, but we are seeing some signs of fatigue from investors so as usual, it's not a slam dunk. We're looking for it to hold above resistance for 3 to 5 days to confirm the breakout.


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

The weekly chart of the S&P 500 remains in a long, sustained uptrend and fighting it has been futile, although there have been short-term opportunities to sell strength and buy weakness.


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

The Wilshire 4500 (S-fund) was the laggard on Friday. The falling dollar seems to get investors interested in the larger U.S. stocks since they've lagged this year with the dollar rising. I don't know if the dollar will continue to fall, but if it does, perhaps the large caps will start to outperform the small caps


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

The Nasdaq gapped up on Friday morning and has led the indices during the recent breakout. There is a small open gap on the chart and it may have hit resistance at Friday's high, but the resistance is rising and that means there is still room to move slowly higher.


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

The Dow Transportation Index took a day off on Friday after the big day it had on Thursday. It overcame a bear flag and broke back above the 50-day EMA last week. Friday's dip tested the 50-day EMA's support and so far has held. Friday's lower high and higher low created an "inside day" which is basically a continuation pattern so I would expect the 50-day EMA to hold and the upside to resume.


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

We have been very concerned about the rising wedge formation of the EFA (EAFE Index / I-fund) and suggested it very much need to break above the top of that wedge to overcome the bearish formation. On Friday it did. Now it needs to hold above that line for 3 to 5 days.


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

The dollar fell below the 50-day EMA and unless it recaptures it, there may be a new downtrend forming, which makes the I-fund a little more attractive to us if you're in the stocks funds.


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

The VIX (Volatility Index) is one of those other things and it is now down near 12.0. That's getting on the low side and in November / December we saw the S&P 500 peak and pullback when the VIX was down at this level. But last summer it actually got lower without too much damage. This is a slight warning sign that investors are getting more complacent.


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

The AGG (bonds / F-fund) rallied on Friday and is now facing the old support line, which could now act as resistance. The 111.75 area has also been a tough level for it to crack recently, but the more often it tests it, the more likely it will eventually break out. This chart leans on the bearish side for bonds right now, but a move above 111.75 would change that.


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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