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Job report triggers rally. Can it hold?

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Stocks capitalized on a strong jobs report and rallied strongly on Friday, forgetting all about the trade concerns that took them down the day before. The Dow gained 219-points so the large back and forth gains and losses continued on as investors try to piece together the clues they have been given from each catalyst. Bonds were down but they seem to just be digesting those large gains picked up over the last couple of weeks.

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The jobs report triggered a good sized rally and the question is whether is was good enough, and it was good, to avoid the typical post jobs report fade. Big moves caused by the jobs report tend to dissipate (up or down) in the coming days so fading a big move is usually a good way to play it. That is unless it's a game changing report that changes the tone of the entire economic environment, which is rare but does happen.

This was a nice rally for the Dow and S&P, but it didn't really move much higher after the morning peak so it's questionable whether it was a tone changer. There was a technical breakout from the recent bull flag that we've been watching, but as you'll see in the S&P chart down below, there are still some roadblocks.

The Nasdaq was a different story and the FAANG stocks continue lead this market, but how long can a few carry the load for all?

June does have a reputation of being a tough month despite early strength, so looking forward it looks as if the indices will be riding with a bit of a breeze in its face this month.


Chart provided courtesy of www.sentimentrader.com




The S&P 500 / C-fund rallied strongly and broke out of that bull flag that we've been watching (blue). I really like that formation but that large bear flag (red) is still looming and if the S&P is going to try to move back to the top of that flag (near 2780) it will have to get above the open gap near 2750. The problem with some gaps is that once they get filled, the upward momentum subsides.




The S-fund closed at another new high on Friday but you can see the resistance that the chart is dealing with now. The rising wedge formation (blue) is also a concern. Longer-term the chart looks pretty good but it has some short and intermediate-term roadblocks for now.




The Dow Transportation Index remains in the "F" flag, which can climb for a while, but when they break, and they tend to break down, it can be sharp.




The EAFE / I-fund continues to lag despite the moderate gains on Friday. The dollar was up slightly and remains near multi-month highs and that is keeping the pressure on International stocks. There are a couple of large gaps that could garnish some attention, and the 200-day EMA is holding, but it is below the 50-day EMA and we know about the issues in Europe.




The price of oil is still struggling recently and it broke below a bear flag formation on Friday. Inventories are high and that should help the consumer, but it could mean the energy sector may slow down here.




The AGG (Bonds / F-fund) pulled back and filled an open gap, but there are still three other open gaps below.




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


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SPY (C Fund) (delayed)

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