TSP Talk Blog

Stocks were mixed on Friday with the Dow gaining 64-points (+0.26%), the S&P 500 picking up a couple (+0.09%), while the Nasdaq, dragged by the losses in Amazon, was down 0.25%. Small caps kept their winning ways going but as you'll see in the charts below, the S-fund index hit the 200-day EMA on Friday.

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The January jobs report was released Friday and the economy added 304,000 jobs, handily beating the estimates of 170,000, while the unemployment rate moved up to 4.0%. The averages hourly earnings came in a little lighter than expected (+0.01% vs. +0.02% expected), which softens inflation concerns, but the jump in the number of new jobs was enough to send bond yields rallying (bond prices lower).

We leave a monster January behind, and while the gains were tremendous, the S&P 500 is still below where it started in December, and more than 100-points below the November highs. So, you can conclude either that there's more room to run on the upside, or that this was just a relief rally in a bear market.

As we mentioned last week, February is historically one of the weaker months of the year on average so if the rally is going to continue, there are some headwinds coming into this new week.

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The S&P 500 / C-fund moved above the 200-day EMA last week for the first time in two months. The last two times it did get above it, the stay was short-lived. That makes this week quite important. If it can close above it for 3 to 5 days, that will be a big tell for the market, otherwise, the bears will likely jump on any hesitation.




One of our members posted a link to a story about this chart. It's the long-term monthly chart of the S&P 500 showing the breakdown from bull markets to the bear markets of 2000 - 2002, and 2008 - 2009. And of course, what we saw happen late last year when the bull market support line broke down. Each broke down, tried to rally back before failing, and the prior ones eventually hit the 200-day EMA before eventually bottoming. That's a long way down from here if it plays out again.




The DWCPF (small caps / S-fund) just keeps sailing along, but it too hit the 200-day EMA last week, although it closed just below it again. It has been on a tremendous run, but like the S&P 500, it is still below where it started in December.




The EFA (EAFE Index / I-fund) is still well below the 200-day EMA but it has broken above a couple of resistance lines along the way.




The price of oil has moved up along with stocks, or is it the other way around? It's been a big rally off the December 24 low, but after a 32% gain, I would think it too is due for a breather. It moved above one level of resistance but that wedge formation is getting a little long. I would look for the oil bears to make a move this month against oil.




The AGG (Bonds / F-fund) was down sharply on the strong jobs report on Friday, but it gave the chart an excuse to come down and fill that open gap. That 106.75 breakout area may try to act as resistance.




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

Tom Crowley


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