TSP Talk Blog
Getting sea sick?
by , 04-10-2018 at 01:22 AM (1095 Views)
Stocks came out of the starting gate on Monday morning like a thoroughbred on steroids, but after reaching top speed in the early afternoon, it ran out of gas and rolled downhill the rest of the way. The Dow, up about 440-points at the high, closed up just 46. That was the case across the board, big gains turned into modest gains with a couple dipping into negative territory.
The jobs report came in light but it was overshadowed by the market's latest obsession - the Tariff Talk / Trade War, which Trump sparked again on Thursday night. Stocks actually bounced quite a bit after the release of the jobs report, but that faded when the market opened and as the day wore on and headed into the weekend.
Daily TSP Funds Return
Some late afternoon news of a new deficit number was reported and updates in the Mueller investigation made for a double dose of trouble and the early big day for stocks turned it into a modest gain, but a negative reversal day for sure.
I have been doing my taxes all day and I'm a little burned out, and after what the market did to us on Monday, I don't have to much to add to what I said yesterday with stocks being volatile and trading in a wide range in what could be a bear flag, or a bottoming formation. So I'll leave yesterday's commentary below and just post a couple of new charts for today. Here's a little quote from that commentary if you don't want to reread the entire report...
"...even if stocks do move higher over the next month, we could see some kind of flushing out, or capitulation first, from bulls who are not so convinced about this market. It could get ugly IF that happens, and it will be difficult to watch but it could be potentially a great time to buy if you are not already in the market. You would be doing it while the masses are exiting in panic so it would not be comfortable."
The S&P 500 / C-fund recaptured almost all of Friday's losses on Monday morning before rolling over and giving most of those gains up again. That created a negative reversal day but it remains in the 100-point range that has been forming for over two weeks now between 2575 and 2675. There's still a bear flag on the chart, but there is an outside chance, if it doesn't break down soon, that it is some sort of "V" bottom.
The High Yield Corporate Bond Fund was actually up nicely on the day, and unlike stocks, it held onto its gains. As you can see, it is now back above the 50-day EMA, which is a very interesting development that could be a positive for stocks if it holds there.
The AGG (bonds / F-fund) was up solidly again on Monday and if I'm not mistaken, I see an actual bull flag on this chart. That could lead to a short-term push up to the 200-day EMA, but from there it could have some problems since it is still in a bear market.
Thanks for reading. We'll see you back here tomorrow.
Tom Crowley
4/09/18
Stocks were rocked on Friday by comments from President Trump regarding more tariffs on China and after all was said and done, the Dow lost 572-points, or 2.34%. Most of the major indices gave away 2% or more with the Transports losing nearly 3%, and small caps falling just short of 2%. The I-fund held up much better as the Tariffs don't have the same impact on European companies.
Daily TSP Funds Return
The futures opened modestly higher Sunday night, and with the quasi-positive reversal on Friday afternoon to push the S&P back above the 200-day EMA, an early rally wouldn't be a surprise, but can it hold?
The volatility we've seen does not feel normal, but it actual is. We're just comparing the recent swings to the post-2016 election complacency of 2017, non-volatile market, which actually was the anomaly.
I don't like some of the charts and sure, they could breakdown and change things, but for now, we're near the test of a 10% correction, and that may not be a bad thing.
But even if stocks do move higher over the next month, we could see some kind of flushing out, or capitulation first, from bulls who are not so convinced about this market. It could get ugly IF that happens, and it will be difficult to watch but it could be potentially a great time to buy if you are not already in the market. You would be doing it while the masses are exiting in panic so it would not be comfortable.
That flushing out is not mandatory this time around since we saw it happen at the February lows, and that's just a set up for a market bottom - a high volume mass exit that basically takes everyone out of the market, who had any concerns about it. Once they sell, who would be left to sell? And once the sellers are gone, the only people left are buyers.
This isn't a prediction, but rather a synopsis of prior market lows. We've been waiting for a test of the lows, and now that test is upon us. Even if we do see a lower low, watch to see how it is handled by investors. A high volume down day followed by an intraday reversal would be what we'd look for in that case as a capitulation low.
If stocks fall sharply below the 200-day EMA and stay there for more than a couple of days, then we may have a different situation on our hands and we'd be talking about a bear market. So let the games begin...
The S&P 500 / C-fund is still in a troubling looking bear flag but it is desperately, but successfully remaining above the 200-day EMA, despite Friday's big losses. The lines in the sand are drawn but even if we get a scare to the downside, look for the close to tell us if the dip buyers are still willing and able at this test of the lows.
The weekly chart shows that we temporarily breached the lower end of the longer-term rising trading channel, but it did manage to close just inside the channel by the end of day on Friday. As we saw the extremes on the upper end to start the year come back into the channel, perhaps the breakdowns will also find their way back as they did last week.
The small caps / S-fund are in a bear flag and below the key 50-day EMA, but above the even more important 200-day EMA. The wide swings may continue but just keep an eye on the upper resistance and lower support to see which one holds, and which doesn't.
The Dow Transportation Index had a rough -3% day on Friday but as you see in the chart, not much changed. It's not a great looking formation but like the others, it's the 50-day and 200-day EMAs that matter right now.
The EAFE / I-fund had a positive day on Friday and my assumption is that people were opting for overseas stocks with the U.S. tariff talk. There is a large gap down below 69 that may have some short-term negative ramifications.
Today is the 9th and seasonality will be on the bulls' side for the most part over the next few weeks.
Chart provided courtesy of www.sentimentrader.com
The AGG (bonds / F-fund) was up solidly on Friday. It had looked like the recent rally in bonds was about to fade but with stocks selling off on Friday, there was a bit of a flight to safety from stock investors.
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
Thanks for reading. We'll see you back here tomorrow.
Tom Crowley
Posted daily at www.tsptalk.com/comments.php
The legal stuff: This information is for educational purposes only! This is not advice or a recommendation. We do not give investment advice. Do not act on this data. Do not buy, sell or trade the funds mentioned herein based on this information. We may trade these funds differently than discussed above. We use additional methods and strategies to determine fund positions.
Go to Profile
Mark as Read
