TSP Talk Blog

Stocks gapped up higher on Friday morning and we saw some decent gains across the board, but some afternoon selling took the Dow and S&P 500 well off their early highs. The Dow ended the day up 66-points, which was about half of the 135-point gain it had before noon.

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The small caps, on the other hand, held up very well and closed at their highs of the day - gaining 1.4%.

The charts had been deteriorating but were holding desperately around some key support levels. The bulls will need more upside action, or least no more downside, to keep the charts from breaking down.

The S&P 500 (C-Fund) bounced back above the 50-day EMA on Friday after successfully testing the 200-day EMA on Thursday. It is still within the right shoulder of the head and shoulders pattern so we don't have a breakout or a breakdown yet, but we did see a possible fake-out to the down side on Thursday. The market really isn't out of the woods yet, and probably won't be until we see a new high above the April peak. In the interim, the action is holding up so far in the short-term, but the bulls have some work to do.




The SPY chart shows a small gap that was opened on Friday morning. It is just above the 50-day EMA so that could be a lure in the short-term, and it needs to hold if filled.




The weekly chart of the S&P shows an inverted head and shoulders pattern forming (in green) after what looks like a bearish head and shoulders (red) came back to test the head. I don't think anything definitive can be concluded here, but one thing the bulls really need to have happen is for that 50-week moving average to hold. You can see what happens when that breaks.




The DWCPF (S-fund) rallied strongly on Friday and recaptured the 50-day EMA. It remains in a short-term downtrend and the important 200-day EMA is now in the way of any attempt to breakout above resistance.




The EFA (I-fund) has been consolidating in May and the question is whether that is a bear flag, or just a higher low forming? It is below the 50 and 200-day EMA so the bears have some control here. The recent strength in the dollar isn't helping it.




The dollar (UUP) has rallied all month which of course puts some added pressure on the international markets and the I-fund. But now the dollar is facing some possible stiff resistance as it hits a 4-month descending trend line.




The AGG (Bonds / F-fund) was up slightly on Friday but after Wednesday's Fed induced sell-off, it may be trying to form a bear flag. The longer-term support line was broken but so far the 50-day EMA has held.




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

Tom Crowley


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