TSP Talk Blog

Stocks rallied on Monday morning after a favorable outcome out of the election result in France, plus the nerves going into the weekend were abated with no further geological events, although the threats still remains. The Dow jumped 216-points and we saw 1% plus gains almost across the board.

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The I-fund had the big day as not only did we see 2% to 4% gains in the European indices, but the dollar (UUP) dropped on the strength in the euro giving the international funds a big boost.




Stocks are not out of the woods yet because of this week's potential government shutdown if congress and the president can't agree on a budget, but from a technical standpoint the charts have risen above some very key resistance. If we don't see some selling today it may be a call to action for the bears who who missed the rally yesterday - and last Thursday - to do some buying and that could provide more fuel for stocks, as long as the geopolitical environment doesn't get stirred up again. An ideal setup for stocks would be to see some early selling with dip buyers jumping in on those dips by the close. Another gap up and it would be getting too stretched.


The SPY (S&P 500 / C-fund) pushed through the neckline of the inverted head and shoulders pattern that we have been watching. The H&S initial target would be around 240 if the neckline can hold for another couple of days. Volume was strong and the PMO indicator improved, closing in on a positive crossover above its moving average.




The DWCPF (S-fund) broke above its lopsided inverted head and shoulders last week and gapped up closing in on its all-time highs.




The Nasdaq did make a new all-time high yesterday so its relative strength continues to lead the US. market.




The Dow Transportation Index gapped up above the 50-day EMA, something it has struggled to do for several weeks. Yesterday's high did hit the top of a parallel channel which may actually still be a big bear flag, so this would benefit from one more push higher above that possible resistance.




The EFA (I-fund) was up 2.35% yesterday creating a huge open gap on the chart. It went from below that long rising trading channel, to close to the top in one day. That's a lot of backing and filling that is possible here, but "breakaway" gaps can go a long time without being filled. If it is a breakaway gap we would see continued gains in the coming days, otherwise the draw of the open gap may get too strong.




The AGG (Bonds / F-fund) actually had a decent day after opening sharply lower on Monday. Bonds had every reason to sell-off, but they hung in there with some intraday buying. Gold did the same thing so the safety trades have not rolled over yet.




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

Tom Crowley


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