TSP Talk Blog

Stocks rallied on Friday with an assist from a Goldilocks type jobs report. The Dow ended the day up 100-points and that was off it's early afternoon best levels but the broader indices were able to hold onto most of their gains. The Nasdaq had a big day gaining 1.34%

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The June Jobs Report came in better than expected, beating estimates by about 20,000 jobs. The unemployment rate ticked up to 4.0% as more workers entered the workforce, and wages came in a little lighter than expected so that serves to perhaps keep the Fed from getting overly aggressive with interest rates, and that's why they were calling it a Goldilocks report.

Some setbacks with the North Korea negotiations may give the market something to think about this week, but ... OK, last time I'll bug you with this... seasonality is on the bulls' side for the next week or so as investors position themselves for earnings season later in the month where, as you can see starting on the 18th, there can be a sell the news reaction.


Chart provided courtesy of www.sentimentrader.com

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The S&P 500 / C-fund rallied up to fill that open gap near 2750 and the top of that gap did not stop the momentum, as is sometimes the case. As we talked about on Friday, head and shoulders patterns don't always breakdown. In a market that is trending down, yes, they are very bearish patterns. But in a market trending upward they can be continuation patterns, and that may be what we're seeing here. The other possible option is that it is just testing the middle of the head so we'll have to see if that 2770 area becomes tough to break.




The small caps (S-fund) also filled and flew past its small open on Friday. This chart looks quite good after a successful test of the 50-day EMA.




The EAFE Index (I-fund) filled its second gap but remains below the 200-day EMA, and that is the immediate challenge for this fund. There are some large gaps still overhead but it would have to get above the 200-day EMA first. There is a small open gap down near 66.50 that may be a target if the 200-day holds as resistance.




The German DAX chart is also nearing the 200-day EMA, as well as the 50-day EMA and you can see how the DAX has struggled to move past these (mostly the 200 EMA) on the first attempt.




The Financials were up on Friday but you can see that it is still having a difficult time trying to break its descending resistance line and the 200-day EMA.




The High Yield Corporate Bond Fund has come back to life after a stint below the 50-day EMA. This has been consolidating since it made highs in January and pulled back at the double top in June. If this can mange to make new highs it would be a very bullish indicator for the stock market as it shows signs of a healthy debt market.




The AGG (Bonds / F-fund) continues to rally off of the June lows as the less than inflationary jobs report on Friday helped push yields down again. The peak in May may provide some resistance if the rally continues.




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Thanks for reading. We'll see you back here tomorrow.


Tom Crowley


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