TSP Talk Blog

Stocks rallied sharply on Friday after a better than expected jobs report. The U.S. economy gained 287,000 jobs in June, which was over 100,000 more than expected, while the unemployment rate actually increased to 4.9%. The indices moved steadily higher all day and by the close the Dow had added 251-points.

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I have to shake my head a little at the data since the prior month saw one of the worst reports in a long time. May's report was revised down to just a gain of 11,000 jobs, so the two month average was a gain 149,000 jobs, which was actually below the two month estimate of about 162,000.

I made some money in stocks so I won't complain, but given that this 287,000 number is the one that will be used for talking points at this month's Democratic and Republican conventions, it makes it a little suspicious if you ask me. And if we can't trust the numbers, can we trust the rally it triggered?

The Average Election Year chart that I have been posting this year shows that the current strength is in line with the average. The average election year shows a low at the end of June. The actual low was made on June 27 and stocks have gone almost straight up since. The blue line shows the average of all years for the S&P 500, which also happens to be positive.




Earnings season kicks off today with Alcoa reporting after the close. Alcoa is not usually a market mover but in the coming days and weeks the larger companies that can move the market will be reporting.

The SPY (S&P 500 / C-Fund) rallied sharply and while the S&P 500 did not make a new all-time high, the SPY did, and that is more inline with the price of our C-fund because it includes dividends paid by the 500 companies. Considering what has been going on in the rest of the word, these new highs are pretty surprising, and that tells me that investors may be underinvested, which could be fuel for more upside if they start chasing the new highs.




The Weekly Chart in the S&P 500 Index is still below the 2015 high, but it did move to its highest level of 2016 potentially creating a breakout. We've been watching this inverted head and shoulders pattern and if the breakout can hold, and that's debatable, the technical target would be 5% to 7% above the current level.




The DWCPF (S-fund) did not make a new high but it made a higher high above the pre-Brexit peak in mid-June, and it also filed the open gap from earlier in June (blue box).




The Transportation Index had a big day gaining 2.55% on the positive economic data Friday. It moved above the 50-day EMA, and is close to challenging the important 200-day EMA. It remains in a descending trading channel so this one is not out of the woods yet.




The EFA (I-fund) was up but remains in technical trouble as it trades below the 50 and 200-day EMAs. There are 3 major open gap right now, noted on the chart.




The HYG High Yield Bond Fund soared to new highs on Friday, and that is usually a good sign for stocks. While Treasury bonds tend to move opposite of stocks (although not recently), High Yield Bonds tend to move with stocks, and if anything, lead stocks in direction. There's nothing bearish about this chart.




The AGG (Bonds / F-fund) hit new highs again, which is unusual when stocks are at new highs. You can see it is stretched above the rising trading channel and there are plenty of gaps that may need to get filled.




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

Tom Crowley


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