We got a little bounce back on Thursday after the three day pullback. There was a midday scare where it looked like the rally was going to fail, but the bulls did a good job of battling right back, although the close was a little iffy. The action didn't improve the charts all that much and we probably need to see more upside follow through in the coming days or the bears may have at it again. The Dow gained 434-points and the S&P also posted a gain over 1%, but the Nasdaq and small caps of the S-fund lagged again with modest gains under 1%, despite the Russell 2000 small cap leading them all.
| Daily TSP Funds Return
Internally you can see that the Nasdaq share volume was still quite negative despite the moderate gains. The NYSE had more impressive ratios but not quite explosive bottoming type numbers. I was off yesterday but I would have shown that Wednesday's breadth was very negative -- in the the 4 or 5 to 1 in favor of the downside area -- and that was almost bad enough to indicate a low.
The price of Lumber, something that has become synonymous with inflation, has been pulling back this week and this could be a sigh of relief. The price was under $300 a little over a year ago and moving above $1700 was a startling move, so easing back a couple of hundred helps, but there's a lot of support between 1450 and 1200 so it doesn't look like we'll see triple digits again anytime soon unless something dramatic changes in the economy.
The dollar was down slightly after the big rally on Wednesday, but yesterday's high did fill an open gap before it flipped over. It was kind of ironic for me to see the dollar up so big on Wednesday when stocks were plummeting, yet a weak dollar is more representative of inflation, so I admit the action is a bit confusing, although we do know that a rally in the dollar puts price pressure on most everything. It's why the dollar rallied on Wednesday that confuses me.
The yield on the 10-year pulled back after the three day rally, but it found support at the old resistance line. Higher yields means lower bond and F-fund prices, so the dip in yields yesterday gave the F-fund a nice day, however that could be short-lived.
Yesterday's action in stocks was encouraging, but I'm a little concerned that it may turn out to be a dead-cat bounce. The fact that we closed off the midday lows is encouraging, but I would have preferred to see the indices close closer to the highs of the day. The CDC easing mask wearing requirements may be a psychological boost to the nation and Wall Street's psyche, and that could help.
The S&P 500 (C-fund) gave us a decent bounce - a little better than some of the other indices, but that little tail on the top of yesterday's candlestick means investors weren't willing to keep buying at yesterday's highs. To ease my concern, I did see similar candlesticks near other recent lows so perhaps I am being too picky. A low has to start somewhere. The one in mid-March looked similar and you can see stocks did continue lower after that. But the others did see more upside afterward. The orange arrow on February 1st is probably the most similar as far at it happening at the 50-day EMA, but the first day of a new month is a different situation.
The DWCPF (S-fund) didn't fare quite as well yesterday and that doesn't give me a warm fuzzy feeling. It has fallen below key support, remains below the resistance line off the highs, and it closed well below the intraday high. That is a spinning top formation and that's actually a possible sign of a reversal, but I don't like that relative weakness. The rebounds off March lows show much more conviction from the bulls.
The EFA (I-fund) chart looks similar to the S&P 500 and it actually closed closer to the highs of the day. The 50-day EMA has been a wall of support so it seems to be shaping up well for a move to the prior highs - or at least filling that gap near 80. Unfortunately the TSP had to make up for Wednesday's over pricing of the I-fund but cutting yesterday's price.
The Transportation Index broke down on Wednesday, bounced back on Thursday, but you can see it is still below that initial trading channel. The lower support line is a parallel line off the top resistance line so perhaps that will provide support.
The price of oil took dive with the talks of reopening the shut down pipelines back up. However the chart still looks fine, as long as it remains above that red support line and the moving averages.
BND (F-fund) rallied yesterday pushing the chart back up to try to fill in one of the open gaps from earlier this week. But this chart still looks bad. I would be a seller of bonds on any further upside until this can prove it can get back inside of the trading channel. Otherwise, it's just a broken chart.
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