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Market Commentary

January 18, 2019

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 Today's Commentary         (Not seeing a current commentary?)               


Stocks opened lower on Thursday, as we have been seeing recently, but they closed strongly after a trade rumor rally took the indices above some key resistance levels.  The Dow gained 163-points, or 0.67%, and the bulls seem to be taking charge, although we're at a point that is testing the limits of the technical picture in the S&P 500.
 
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Once again the overnight futures were getting hit hard and pushed into negative, and once again the opening bell changed attitudes and we saw the market drifting higher for most of the day, until we eventually got that spike higher on the trade rumor.  That rally faded quickly when the rumor wasn't confirmed, but then the bulls said, "what the heck?  Let's keep buying up here", and the indices all managed decent gains of about 3/4 of a percent.

Is the 3rd time the charm?  The S&P 500 jumped over the 50-day EMA with yesterday's action and we saw this a few other times since the January peak in 2018, and during the most recent occurrences it ended up being a peak for the index.  If it can get above it and stay there, then the bulls take charge and we get something like the May through October 2018 rally.  The bears have their chance.  Will they take it?

    


The spike above the 50-day EMA likely blew through many of the bears' stops which ignites buying since covering a short position is done by buying, and that magnifies the push higher and that was likely why the spike was so quick and so sharp.  That could be the capitulation action after all.  I know we called for this a few times before, but taking out those stops is a symptom of capitulation, and that's likely what was happening at the November and December peaks. 


I've been saying the market needs some rest and clearly, along with many other technical analysts, we've been wrong, or at least we were way too early as the market sure does enjoy frustrating those who think they know what is coming next.  So, just like early 2018 when stocks came into the new year stretched to the upside and continued higher all January, the indices look a little vulnerable to a pullback this January.  If you've been early like me, you missed some of this opportunity, but the drop last February was so quick and erased all of the January gains in a matter of a few days, that it was tough for the bulls to get out in time to salvage anything.  Is that what is in store this year as well?  That's the question on most investors' minds.


Per www.tsp.gov:  "Some financial markets will be closed on Monday, January 21 in observance of the Martin Luther King, Jr. holiday. The Thrift Savings Plan will also be closed. Transactions that would have been processed Monday night (January 21) will be processed Tuesday night (January 22), at Tuesday's closing share prices."


The S&P 500 / C-fund pushed through the 50-day EMA yesterday, something we have seen before with the prior two turning out to be short-term peaks for the index.  This rally has obviously been a longer more sustained rally than the prior two, but that makes it more overbought, and the 11% or so rally off the lows is not atypical for a bear market rally.  The improvements are obvious, but it is still below that 200-day EMA and this brief push above the 50-day has not be kind during this bear market.

    
 

The DWCPF (small caps / S-fund) had another good day also moving above some key resistance.  It feels like things should get tougher here but so far the small caps have shown no sign of slowing down.

     


The Transportation Index shrugged off that bad news from CSX yesterday and rallied over 1.5% on the day, but it is still below the 50-day EMA after peaking at the line yesterday.

     


The price of oil reversed from some early losses to close just slightly higher, but here again it's the bear market road block, or one of them, at the 50-day EMA.

        

      
The AGG (Bonds / F-fund) was down and remained in that wedge formation, so the trade talk rumor didn't really make much of a difference here like it did with the stock indices. 

      


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. 



Have a great holiday weekend!

Tom Crowley


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Chart provided courtesy of www.sentimentrader.com
 
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