The market came into Monday morning with a little hangover from the party it had on Thursday and Friday of last week. The Dow hung tough most of the day and was actually positive until about 3 minutes left in the trading day before it closed down a slight 35-points after being up over 300 near the open. The S&P 500 and Russell 2000 were actually positive at one point during the day before the floor opened up. The S&P lost 1%, which is a bad day but the Nasdaq and small caps each lost over 2%, taking the brunt of the selling as technology stocks lagged badly. The I-fund held up a little better with a 0.5% loss, and bond price declined.
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I have some family coming into town on Monday evening so I was hoping the market was going to cooperate with the bullish set up we had coming into the week, and we'd see flat to bullish action to follow through on last week's positive reversal, but the market had other ideas.
What looked like an awful jobs report on Friday took many by surprise. Not just because of how bad it was, but because of how bullish the market reacted afterward. What changed?
It could have been a reality check as the rally didn't seem quite justified, but the action was bullish late last week, and even the weekly chart, as I showed yesterday, gave us a rare positive reversal weekly bar, but so far no joy from that normally bullish signal. The only headline I saw that may have caused some concern was, "The WHO classifies triple-mutant Covid variant from India as global health risk."
The big tech stocks got hammered yesterday with the Nasdaq down 350-points. And if we take the large tech companies out of the equation to some degree, the Equal Weighted S&P 500 was only down 0.34%on the day versus the -1.04% of the S&P 500 with those large techs weighted as they are.
Yields were up sharply making it even that more confusing. We've seen strong economic data send yields down and then after the awful jobs report they started rallying. The opposite of what you might expect. The dollar was flat after rebounding from a weak opening.
I'm not sure how much of what happened yesterday needs to be taken as a warning sign. Stocks had come a long way since the reversal started at Thursday's low, and this could be a fake out to send weaker bulls packing again. The S&P 500, Dow, and Transports were all looking like they needed a breather but the Nasdaq and small caps have already had serious pullbacks and they were beaten down again. We'll take a look at a couple of charts below and see what's what.
The S&P 500 (C-fund) tagged the top of that red trading channel on Friday and it continues to hold off any further breakout, but of course that resistance line is rising so it's not necessarily a deal breaker for the rally, although there is more room on the downside if this index ever decides to take a dip - something it didn't really do in April. The set up on the PMO indicator looks similar to what we saw in February when the S&P did pull back for a couple of weeks.
The DWCPF (S-fund) continues to post big moves, either up or down. The big positive reversal last Thursday is still hanging in there as the recent low, but not by much anymore. Today could be the test to see if the buying will persist in that 2120 area. There is an open gap up near 2200, and a rising support line near 2110.
The EFA (I-fund) held up a little better than the U.S. indices, and the dollar didn't end the day with much of a change so it wasn't a factor. There is room on both sides of this chart, more so on the downside, before hitting the longer term resistance or support.
The Transportation Index posted a very negative reversal day, but other than some short-term hiccups, recent negative reversals were brushed off rather quickly. It hit the top of its channel before backing down yesterday, but support isn't too far below either.
BND (F-fund) tanked yesterday for some reason, and it close just below the 50-day EMA, but above the 20- day EMA, and flirting with the bottom of that red trading channel. That's not what I would have expected given a global Covid scare and the weak jobs report last week.
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