View RSS Feed

TSP Talk Blog

New highs

Rate this Entry

Stocks continue to defy gravity as the S&P 500 closed at a new all-time high again despite some seriously extended readings in many indicators.
Yes, the charts have shown some consolidation over the last week or so, and apparently that may be all that was needed for the underinvested to put money to work last week. The Dow gained 54-points on Friday. Small caps led and once again the I-fund was negatively impacted by strength in the dollar.

Daily TSP Funds Return

The charts look good at this point, although support is getting thin and that could be trouble if there is any selling. The thing to watch now, and it's not overly common, is what happened in late 2007, where a breakout to new highs turned out to be a big fake-out. We will show that below in the chart analysis,

The SPY (S&P 500 / C-Fund) made a new closing high on Friday and seems to be in a flag formation, one coined an "F" flag by a futures trader, and friend of mine, Oscar Carboni from livewithoscar.com. F-flags can break to the upside but more often they just move slowly higher until they eventually break down, but that could take days or weeks. A slow steady rally would be a lot more stable than the angle of incline we saw during the formation of the flag pole.




The weekly chart of the S&P 500 shows us a couple of things. For one, you can see the new highs made and that breakout could be the start of a new leg higher. The other thing it shows is that the PMO momentum indicator is not nearly as extended as we have seen during other market rallies, so perhaps this rally has a lot more to go.




The concern that I mentioned above, is the possibility of a fake-out as we saw in 2007. The weekly chart gave a breakout in late 2007, similar to what we see today, but that didn't last long and it turned out to be a long-term market peak. So perhaps not as likely, but certainly a possibility to watch out for in the coming weeks.




The DWCPF (S-fund) made a new 2016 high on Friday. It looks extended but it has consolidated for several days which apparently was enough to fuel more buying.





The Dow Transportation Index led on Friday with a 1.37% gain and appears to be in a bull flag ready to breakout. If there is an issue it's the longer term chart as you will see next...




One of the more import charts is this weekly chart of the Transports. It looks like a very large inverted head and shoulders pattern, which would produce a very bullish upside target if it can breakout, but inverted H&S patterns can be continuation patterns, continuing the larger trend that it was in before the H&S, which in this case was down. So, it is very important for this market leader to move above 8000 with some authority before we can say this is bullish.




The EFA (I-fund) remains in a bull flag above the 200-day EMA. So far so good but there's work here to be done and a breakout above the flag would be a good start.


Chart provided courtesy of www.sentimentrader.com


As we wrap up July and head into August the seasonality during an election year is about as good as it gets. I rarely make seasonality my primary indicator, and I won't this time either, but certainly the seasonal winds are at the backs of stocks over the next several weeks and that really doesn't end until after Labor Day.





The AGG (Bonds / F-fund) remains below that old resistance line (red) while forming a bear flag. That could mean some short-term issues for bonds. There was an article in the New York Times recently that said only 28% of people knew that bond prices moved counter to interest rates. I'll bet a lot more TSP Talk readers knew that one.




Read more in today's TSP Talk Plus Report. We post more charts, indicators and analysis, plus discuss the allocations of the TSP and ETF Systems. For more information on how to gain access and a list of the benefits of being a subscriber, please go to: www.tsptalk.com/plus.php

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

Tom Crowley


Posted daily at www.tsptalk.com/comments.php

The legal stuff: This information is for educational purposes only! This is not advice or a recommendation. We do not give investment advice. Do not act on this data. Do not buy, sell or trade the funds mentioned herein based on this information. We may trade these funds differently than discussed above. We use additional methods and strategies to determine fund positions.

Submit "New highs" to Digg Submit "New highs" to del.icio.us Submit "New highs" to StumbleUpon Submit "New highs" to Google

Comments


S&P500 (C Fund) (delayed)

(Stockcharts.com Real-time)
DWCPF (S Fund) (delayed)

(Stockcharts.com Real-time)
EFA (I Fund) (delayed)

(Stockcharts.com Real-time)
BND (F Fund) (delayed)

(Stockcharts.com Real-time)

Yahoo Finance Realtime TSP Fund Tracking Index Quotes