TSP Talk Blog

Stocks opened higher on Friday but chopped around quite a bit before a late push higher helped the indices to post strong gains. The Inauguration Day did provide some drama, but nothing the market was overly concerned about. The Dow ended the day with a solid 95-point gain.

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Earnings reports will continue to poor in this week with many bank stocks on the schedule, and the question on many investors minds is whether the big move in bank stocks since the election is going to be confirmed with these reports, or if we could get a sell the news reaction, even if they are at or better than estimates.


The SPY (S&P 500 / C-fund) closed with modest gains on Friday and the tight trading range continues to play out. The "F" flag is bullish as long as it lasts, and they can last a while, but when the end they tend to break down. Trading above the 20, 50, and 200-day EMAs is never a bad thing unless things get too stretched, but actually the S&P has been consolidating for about 5 or 6 weeks now so the extremes have been somewhat extinguished.




The weekly chart shows the "F" flag in red, although that can be considered a rising wedge. The longer term trading channel is rising (blue) but the index is closer to the top of the channel so there is a lot of room on the downside if stocks want to consolidate more within the wider channel.




The DWCPF (S-fund) is also moving virtually sideways with a very minor break down from a rising support line last week (red dashed).




The Dow Transportation Index bounced back from Thursday's selling with a good day on Friday holding above the 20-day EMA for a 3rd day. It's not really a bear flag but the bulls will want to see this new rising trend, which is only rising slightly, get taken out on the upside because gradual rising channels tend to eventually fail - like we would see in a bear flag or an "F" flag.




The EFA (I-fund) has shown resistance of late in part due to the recent weakness in the dollar. There was a double top push back near 59.50 but that's normal on the first attempt at a breakout. I continue to look at that open gap near 58.00 as they rarely go unfilled for too long.




China's Large Cap Index remains at the top of a larger descending channel and it will be interesting to see if this continues to rolls over as it started to do late last week, or if the recent rally started in late December can resume. Our markets are always looking for a catalyst and if China starts to falter U.S. stocks may find a reason to get cranky.




The AGG (bonds / F-fund) closed with a small gain on Friday pushing it back up toward the bottom of the rising channel it fell out of on Thursday. This doesn't look like a bullish scenario for bonds this week.




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

Tom Crowley


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