TSP Talk Blog
Rally day 3, but Apple could spoil it
by , 11-02-2018 at 01:11 AM (501 Views)
Stocks were able to push higher on Thursday, moving up to and closing basically to where the highs were on Wednesday before that day's late sell-off. The Dow gained 265-points, or 1.06%, the same percentage gain as the S&P 500. The Nasdaq and the small caps had even more significant gains with the S-fund jumping more than 2% on the day.
That's all good but Apple reported earnings after the bell and their guidance came in a little lighter than expected sending the stock down initially which could be some trouble for stocks early on Friday since the futures are giving up about half of Thursday's gains already as I write this Thursday night. But the jobs report is also coming out before the opening bell so we'll see how it goes.
Daily TSP Funds Return
The jobs report estimates are looking for a again of 190,000 jobs, an unemployment rate of 3.7%, and a 0.2% rise in hourly wages.
The final tally for October is below and the damage was significant. The 10% loss in the S-fund took away the entire year's gains, but as we mentioned, November started with a gain of over 2% for the small caps.
Recent November history has been very kind to small caps, but with interest rates being raised for the first time in a decade, rather than sitting near 0%, that could potentially change that trend.
November starts the "best 6-months of the year" period (Nov - Apr) and the month has been positive 45 of the last 67 years. If that's not enough, since World War II, stocks were higher into year end after an October low, 18 out of 18 times during midterm election years.
The rally may be starting right on queue but today, with Apple's disappointing earnings and the jobs report yet to come, seems like a key day for the market after rallying off the recent lows, which is now reaching up toward the 200-day EMA. We don't know whether we are, or will be, in a bear market, but the 200-day EMA can be a formidable opponent to the bulls if the bear market is going to eventually win out. Or, we could even just head down to test the lows again.
The S&P 500 / C-fund has rallied for a third straight day but relief rallies are no surprise after selling like we just witnesses. The question is, how high can it rally, and do we need to put in a test of the lows eventually to solidify a bottom - assuming we are at a bottom, which may not necessarily be the case. Probably, given the seasonal advantage, but not certainly. The 200-day EMA is sitting about 0.5% above yesterday's close and if we are going to see a test of the lows, will the 200-day EMA be the initial roadblock to the relief rally?
The year to date chart shows that the low end support lines have held so far and the relief rally has exploded 5.4% off the lows (and 1200+ Dow points). The February low was later tested about two months later after the relief rally started failed about two weeks or so after that initial low.
The DWCPF (S-fund) had a big day gaining over 2% and it hit the 20-day EMA for the first time in almost 4 weeks. The 50-day EMA is nearing the 200-day EMA. A crossover would be a negative technically for the intermediate-term, but it also usually sets up an oversold bounce in the short-term, as we've seen so far.
The EAFE Index (I-fund) rallied and while it is still in a bear market, there can be big rallies. One small gap was filled with yesterday's rally and there may be a little more resistance at 63.50 if it can get past that gap, but the next closest open gap is below at 62.
The dollar fell helping the I-fund yesterday and it also gave the chart a failed breakout after it fell below 25.7. It remains in a rising trading channel and it may just be filling that open gap below.
The High Yield Corporate Bond Fund managed to rally back above the 200-day EMA, which is a good sign. It also broke above the descending resistance line.
The AGG (bonds / F-fund) was relatively flat as it churns within that large bearish looking flag.
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Thanks for reading. Have a great weekend!
Tom Crowley
Posted daily at www.tsptalk.com/comments.php
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