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Futures point to a rally to start the new week

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Friday was a very quiet day for the market as stocks traded in a very tight range, as they had done all week. The Dow was flat while the S&P 500 and Nasdaq pulled back moderately. The small caps held up well again adding a small gain to its modest gain for the week, while the large caps and the I-fund saw modest losses for the week.

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The side ways action in the S&P 500 last week took the indicators off their overbought levels and in the process, as you will see down below, created a small bull flag. The overnight stock index futures were up sharply as of this writing, and so it looks like that bull flag will break to the upside to start the day, but we have to be careful about emotional Monday morning gap up openings. They don't always hold.

This is as of about 7 PM ET Sunday evening...




The 10-Year Treasury yield pulled back on Friday so that obstacle was not an issue, but still the bulls couldn't muster a rally, however it looks like they will be trying on Monday. Some political and trade news may be providing the spark.

The price of oil is still getting attention as the price of Brent Crude Oil hit $80 a barrel last week, while Western Texas oil trades above $71. This is taking the price of gasoline up with it and that of course takes some spending money out of the pockets of consumers.



The S&P 500 / C-fund created a small bull flag last week (blue) as it digested the gains from the big rally that peaked last Monday. The futures indicate that we could see the bull flag breakout, as they tend to do, but it is also still within that large red bear flag that we've been watching for a while now, so the top of that flag could provide some resistance.




The S-fund continues to lead on the upside as it flirts with new highs. One level of resistance was taken out last week and it is now challenging the March highs.




The Dow Transportation Index is also challenging its resistance as it moves toward the 10,800 that has been a tough nut to crack for the last several months.




The EAFE / I-fund was down slightly on Friday and it is now trading below the recent highs so it looks like failed breakout for now.




The price of oil is near multi-year highs and at some point the consumer is going to feel it.




That's because it pushed the price of gasoline higher, and as you can see, gas futures are also at multi-year highs. The strength of oil and gas is even stronger than what it appears because the dollar has been rallying at the same time. As the dollar goes up, prices of anything sold in dollars tends to be put under more pressure.




The 10-year Treasury Yield pulled back on Friday, but after breaking above a couple of levels of resistance, there is now some support between 3.0% and where it closed on Friday near 3.07%. There is an open gap near 3.0% also.




The AGG (Bonds / F-fund) rallied for the first time in a while but it ran into the old support line and held. There is a big gap open near 105.8, which could be an upside target, but it has to get above that resistance line near 105.30 first.





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

Tom Crowley

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

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