TSP Talk Blog

The bulls showed up early on Friday and with Janet Yellen's new dovish stance investors got more aggressive with a broad rally rather than a sector by sector rotation as we had been seeing. The Dow gained 85-points on the day and we saw new highs, or close to it, in many of the major indices.

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The rotation rallies had been a possible result of the low cash levels from money managers and mutual funds. In order to buy one thing, another had to be sold, but that didn't happen on Friday. But is that, and a VIX at multi-year lows, a sign of over bullishness and complacency? I guess only time will tell.

According to sentimenTrader.com, "The last time at least four of the indexes and a/d line closed at a new high at the same time, and the lone holdout was within 0.25% of a new high, was on March 1. That happened to be a modest peak, but that's usually ignored in favor of the good news that "everything" is rallying."




The SPY (S&P 500 / C-fund) broke out to a new high on Friday like most indices, nearing some possible resistance, but the trend is still rising, as is the resistance line. That open gap below 243 will keep the bulls looking over their shoulders because we know they tend to eventually get filled. The late selling on Friday did create a slight negative kangaroo tail, but it looks pretty minor.




The DWCPF (S-fund) also made a new high while hitting a couple of potential resistance areas at Friday's high. The open gap is there so now it's a battle between momentum traders and FOMO investors (Fear of Missing Out) versus the profit takers who see the indices as extended, overbought, and investors as potentially overly complacent.




The EFA (EAFE Index / I-fund) led the way on Friday as the dollar is being beaten up by the comments from the Janet Yellen about slowing down on their rate hikes. A new high was posted on the EFA but the large gap is still below.




Here's the chart of the dollar that you can see made new 2017 lows on Friday.




The Nasdaq 100 has been on a torrid pace since the breakdown just a couple of weeks ago. It has been up 6 days in a row and 8 of the last 9. Can it make a new high or has the recent rally taken too much steam out of it?




The AGG (bonds / F-fund) rallied early on Friday but gave back a lot of the intraday day gains. I guess it could remain in its rising trend and move back to the top of the rising channel, now that it made its way back above the 20 and 50-day EMAs.




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

Tom Crowley


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