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Can the "Trump taxes" rally continue this week?

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It wasn't a huge rally, but 0.33% - 0.56% is more solid gains added onto the Thursday big day so the Trump taxes comment rally got some follow-through. The Dow gained 97-points on Friday and small caps outpaced the large caps and the international stocks, with a gain in the dollar partially responsible.

Daily TSP Funds Return



Stocks had stalled for a few days to start the week last week but comments from Trump regarding addressing the income tax issue within the next 2 or 3 weeks sent stocks higher Thursday and Friday.

When a new high was made in the S&P 500, Dow, Nasdaq and Russell 2000, for the first time in 30 days, going forward it was 50/50 on whether stocks were up or down over the next week or two. Even up to three months later, stocks were down 11 times out of 19. Of course that means they were up 8 times, and perhaps this situation is going to be one of those up times. We can only wait and see.


Chart provided courtesy of www.sentimentrader.com


The SPY (S&P 500 / C-fund) popped above the flag formation on Friday making a new all-time high. Whether it was for real or a continued emotional reaction to Trump's comments will likely be answered this week. Many traders have been frustrated by the indices ability to continue higher despite the charts and many indicators showing they could have trouble. I suspect we could get a pullback fairly soon but since the election, nothing has been typical.




Not to make this a commercial, but one trader that has made some great calls this year is our Intrepid Timer premium service. Despite the small wiggles in the indices, his system has been zigging and zagging at the right times, and this is going back nearly a year after very bad start in 2016 that chased some impatient subscribers away. The ones who stuck with him have really been rewarded with a strong finish last year and a gain over 5% already this year, easy beating the returns of all of the funds. You know I don't usually do this but his results were worthy of mention. Anyway, as I said, I read a lot about trading from other traders and this is not the case with most of them this year. This strength has taken them by surprise.

The weekly chart once again ran up to the top of the wide rising trading channel. I have been saying that the risk reward might suggest there is more room on the downside, but for another week the buoyancy in stocks has kept it pinned near the top of the channel.




The DWCPF (S-fund) made a new high as well and is in the neighborhood of the top of the flag / channel formation.




This is a monthly candlestick chart of the Nasdaq 100 where each candlestick represents one month worth of action. Starting in early 2009, this bull market is now about 8 years old and the QQQ has remained within this parallel rising channel since. After testing the bottom of the channel in 2015, it has risen all the way up to the top of the channel. Again, it seems like the risk / reward suggest there is a lot more room on the downside, but it can also stay pinned to the resistance line for a while before it pulls back. Perhaps it is safe to say that it may not be as easy to move higher from here.




The EFA (I-fund) rallied on Friday and it has been riding below that old rising support line of the rising wedge pattern.




By the way, a little follow up on Greece's stock market which has us concerned... It jumped 2.46% on Friday pushing it back above some key support and the 200-day EMA, but it is now hitting the 50-day EMA as resistance. It's still not the best looking chart but that action really helped it.

The dollar was up on Friday but it did close off its highs. It broke above its 2017 downtrend and the 50-day EMA, last week which is a very good start for it, but there is some potential resistance in the 26.1 area.




The AGG (bonds / F-fund) continued its pullback from the 200-day EMA on Friday, but it closed well off the intraday lows and appears to have gotten some support at the 50-day EMA. There's also a potential double dose of support near 107.85 if the 50-day EMA does not hold.




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

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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)

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