In a week of give and take, Thursday was a giver as the indices closed with big green numbers after a couple of not so bullish days. The Nasdaq has been leading this market, either up or down, as the semiconductors try to decide if there's more meat on that bone in the second half of the year, or if it's time to sell those first half high flyers.
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Daily TSP Funds Return
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The price of oil and yields were once again major catalysts for the stock market yesterday as both closed moderately lower on the day, after their recent rallies sent stock lower earlier in the week. The chart of oil is technically bearish as it trades below several key resistance levels, but we know hawkish Iranian headlines will give it a relief rally. Yesterday it took back some of that relief rally.
The 10-year Treasury Yield was down yesterday, but only enough to fill in the open gap from the prior day. This chart looks more bullish in that it trades above the 50 and 200-day averages, as well as the 20-day (not shown) so this is now trending upward.
That is because the market has been pricing in interest rate hikes from the Fed. We have another FOMC meeting at the end of this month and while the odds of a hike have improved, the probability of a quarter point hike is currently 25%. That was down from the day before but up from a week ago.
The nature of pennant formations is that they tend to gyrate back and forth within the pennant until one side or the other breaks.
The S&P 500 (C-fund) made another attempt to breakout of its bullish pennant formation, but there are other possibilities. Do you remember those posters in the 1990's where if you stared at the poster's designs long enough, a hidden image would eventually show up? That's what I see here... the bullish pennant and new potential breakout, but also a topping formation with lower highs surrounding the peak in June.
The indicators still look pretty good.
The Dow Transportation Index made a move yesterday, a 2% rally, following weeks of mostly sideways action. This could be a fake out, but the fact that it broke above the descending resistance line is a good sign.
Jobless claims came in a little better than expected but there has been some concern about the economy. Ironically weaker economic data could help nudge the Fed to the "no change" category on rates at July's meeting.
Additional TSP Fund Charts:
DWCPF (S-fund) was at the top of its trading channel at the beginning of the month and we knew a trip to the bottom was not out of the question. A few days later it was there, but now it is bouncing off that support just as quickly, making it tough, or maybe
frustrating, for any market timer who isn't day trading. Just looking at the pattern my guess is that 2950 - 2975 could be a week or so away. At some point this channel will break or change, but it hasn't yet.
ACWX (I-fund) also rebounded off the support from the 50-day moving average on Wednesday, and yesterday we got some follow through to the upside to put it back in the blue channel. Wednesday's share price was negatively adjusted because of the late rally, which means Thursday's I-fund gain "should" have been better than the ACWX's +0.73% gain, but it's not for some reason.
BND (bonds / F-fund) rebounded but stopped at the 50-day average. As always, support, once broken, can act as resistance.
Thanks so much for reading! Have a great weekend!
Tom Crowley
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