Stocks experienced a big positive reversal day yesterday after more selling to start the day, but they bottomed in late morning, and buyers really showed in the final hour of trading. The Dow gained 318-points, while the S&P 500 and Nasdaq, which were both red for most of the day, closed with solid gains in front of today's jobs report. Small caps were having an awful day but closed well off the lows to post just a moderate loss. Bonds were up again despite the strong jobless claims report on Thursday morning, and the dollar rolled over again.
| Daily TSP Funds Return
The internals were positive on the NYSE but the Nasdaq is still lagging. The late rally may not have given breadth a chance to catch up on the Nasdaq, but one concern is that new highs / new lows on the Nasdaq. Those high numbers on both sides start to trigger those Hindenburg Omen warnings.
The dollar tanked again after the recent relief rally, and other than an overhead gap that could get filled, the chart looks bad and that could be good news for prices in just about anything trading in dollars like commodities, metals, even stocks - particularly the I-fund. As I've said before, that doesn't mean the I-fund will be up, but it could perform better than U.S. stocks when the dollar dips.
The yield on the 10-years slipped again and this must not be driven by anything economic but rather it could just be that the U.S. has one of few 10 years bonds around the world that is still paying a positive yield.
The positive reversal yesterday is generally a good sign for stocks the following day, at least to start the day, but of course headlines and data could get in the way.
Speaking of that, the April Jobs report will come out before the bell today (Friday) and estimates are expecting a gain of 1 million jobs, and an unemployment rate of 5.8%. Those are some big expectations so watch out for any surprises.
The S&P 500 (C-fund) fell down to the 20-day EMA for the second time this week yesterday, and both times we saw buyers step up so this index refuses to do any kind of serious pulling back. Some of that strength in the large cap indices, like the Dow and S&P is due to the weak dollar which helps global U.S. companies. Is this too hot, and ready to rollover like the Nasdaq and small caps have already done, or are those two indices ready to bounce back in sympathy with the strength in the large caps? It's tough to say, but it's not tough to say that the action has been bullish.
The DWCPF (S-fund) looked like it was going to break down yesterday, and it was in the process of doing so before the late afternoon rally took hold and reversed everything back up. The bad news is that it closed below the 50-day EMA again, but as we saw in prior pullbacks, each breakdown break below of the 50-EMA led to buying opportunities.
Taking a look at the Russell 2000 small caps chart we see the mothman pattern nearly completed, but so far no breakdown as we might expect in a head and shoulders pattern. I'm calling this a mothman in jest because of those sharp wings, but this is very similar to a head and shoulders pattern.
The EFA (I-fund) just made a new all time intraday and closing high yesterday, and a lot of that continues to be because of the falling dollar. The fact that the dollar just rolled over again after a failed relief rally could be telling us there's more leadership here to come. On the other hand, each time this fund has poked its head above that channel it has been swatted back down so it's in quite the situation right now.
BND (F-fund) was up modestly again yesterday as there still seems to be a bid for bonds despite how well the S&P 500 and Dow have been performing. Perhaps it has been the alternative to the growth sectors of the Nasdaq and small caps, which have been underperforming in recent weeks.
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
For more info our other premium services, please go here...
To get weekly or daily notifications when we post new commentary, sign up HERE.
Thanks for reading. Have a great weekend!
Like what you're seeing on TSP Talk? Why not
Tell a Friend about us? We'd really appreciate it, and they may too.