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Most of the major indices were higher on Thursday after another solid afternoon of trading reversed some morning selling. The Dow gained 185-points while the Nasdaq was up for a 7th straight day. But the rally was driven mostly by the large caps as market breadth was actually negative and that tends to mean the Dow Completion Index, or our S-fund, was lagging, and it was. Bonds were up again.
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The stronger than expected initial jobless claims report helped yesterday, as did the travel restrictions being lifted, but the rally wasn't as broad as it had been earlier in the week.
Despite the Nasdaq being up 1%, there were actually more stocks down than up, but you can see that the more highly traded stocks did well by the positive advancing volume. The NYSE was another story as the number of stocks that were down outnumbers the advancers, and the volume was similar. That means the broader market didn't do as well as those shiny large cap indices.
But the small caps have been having a big week and a day of rest isn't usually a bad thing.
The weak dollar has been a catalyst in helping stocks remain buoyant and it was down slightly again yesterday. Today's jobs report could make things interesting if it it strong and causes a rally in the dollar.
I apologize for not mentioning the jobs report earlier in the week. I did post a late update in Thursday's commentary regarding the release of today's report because the estimates at briefing.com are little crazy and that could lead to a potential big reaction in the market.
The difference between briefing.com's consensus estimate (+2.0 million jobs) and their forecast (+250,000 jobs) is as wide a spread as we've probably all seen in our lifetimes. Either that's a misprint or this jobs number could be anything within a range of 2 million jobs which is obviously an opening for a dramatic miss or beat, and a potentially wild day on Wall Street.
The unemployment rate estimate is about 10.5%.
The S&P 500 (C-fund) pushed higher yesterday in front of a very mysterious jobs report, so it felt a little odd that investors were so aggressive with so much uncertainty before today's jobs report. The small gaps remain open just below - one above resistance and one below. The Index closed at 3349 and on the upside there seem to be a draw to pull the S&P toward the February high of 3394, so we're close. Perhaps the jobs report can push it there, but then we have to worry about a double top pullback if it stalls there.
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The DWCPF (S-fund) was actually down on the day but it was having a great week being up 3.4% coming into Thursday, so a 0.23% dip was nothing. It's above the old resistance line which we'd look to be potential support on any pullback. Any close below 1500 would be a major red flag.
The EAFE (I-fund) was up but we're just not seeing it do as well as we might expect given the free fall in the dollar recently. Again the morning weakness in U.S. stocks could be having an impact since these markets close very early. As I mentioned yesterday, the TSP is doing a good job making adjustments. For example, the I-fund was up 1.09% on Wednesday when the EFA was only up 0.33%, so the TSP adjusted based on what U.S. stocks did in late trading on Wednesday.
The Dow Transportation Index continued to make another higher high but it did get a bit of a pullback off the intraday high creating a minor negative reversal pattern, but probably not too concerning. A move back to the breakout area would be normal, but if the jobs report does scare the market that could be vulnerable. 10,000 would be the next support area if that old high does fail.
BND (bond ETF / F-fund) rallied. What else is new?
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Chart provided courtesy of www.sentimentrader.com
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