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Another day, another rally - and another late push higher to the day's highs. The Dow gained an impressive 373-points with the help of a big gain in Disney's stock price, but it was actually the small caps of the Russell 2000 (+1.91%) that led the day, helping the S-fund to a gain well over 1%. The dollar fell sharply again to a lower low, and the market is taking advantage, but how long will / can that divergence last?
| Daily TSP Funds Return
The charts look good with many of the major indices hitting new multi-month highs this week. The Nasdaq's high flying tech stocks had been leading the way but just recently we've seem them step aside and let some others take the lead. Small caps are one of those "others" but the I-fund is notoriously known to benefit from a weak dollar. And of course the metals, but obviously the TSP doesn't give us an option to invest in them. But for you gold bugs, 2020 has been a good year for you.
Here is the UUP dollar ETF and the price of gold moving in opposite directions for the last few months. The dollar closed at its lowest level since early 2019, and gold hit another all time high yesterday after closing above $2000 an ounce for the first time this week.
Does this matter to us? Basically what is working now is the dollar down, stocks up and at some point that will change, but for now that's the trend. The dollar will eventually have some sort of a relief rally and I suppose that could lead to a pullback in stocks, but by then they will probably need the rest.
Meanwhile stimulus and vaccine optimism, plus some overly bearish sentiment from the herd are keeping the bulls happy. If you're not sure why that sentiment dichotomy makes sense, we talk about it all the time in our TSP Talk Plus Reports.
The July jobs report comes out tomorrow. Estimates are quite
interesting. The difference between briefing.com's consensus estimate
and their forecast for the July jobs report is +2.0 million and +250,000
respectively. That should make for an interesting reaction.
The S&P 500 (C-fund) gapped up yet again on Wednesday so that two new open gaps this week. They're small but they do still tend to get filled eventually. The difference between Monday's open gap and yesterday's is that yesterday's is above the breakout line, putting Monday's gap below some new potential support.
The DWCPF (S-fund) had a big day, also gapping up and above a resistance line, so that could turn into a support line. We have to be a little careful here because of the possibility of the rising wedge giving us a fake-out to the upside, before a breakdown, which is not uncommon for wedges.
The EAFE (I-fund) was up but recently those overseas market have had a tough time keeping up with the U.S. markets because of the choppiness we've seen during the day here. They like to follow our lead but when their markets are closing, our markets are bouncing up and down. The TSP usually does a decent job of accounting for that when making their I-fund price for the day. The EFA did close near the June highs after a nice rebound off of the 200-day simple average (orange.)
The Dow Transportation Index broke out as well. It moved easily above that 10,000 level, and the June highs. This looks pretty solid and the old resistance line could now be support, joining the rising support line off the lows.
The High Yield Corporate Bond Fund made a higher high keeping the stock market happy and content.
BND (bond ETF / F-fund) was down but remains within that long, rising, narrow trading channel.
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Chart provided courtesy of www.sentimentrader.com
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