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Stocks ended the week on Friday with a 5th straight day of losses, and in the case of the S&P 500, an 8th day of losses in the last nine. It was also just the 2nd Friday in 2019 that was not positive. The Dow lost 23-points, but if you watched the market during the day you know that it climbed back from the much steeper losses at the opening bell so, despite the loss, it's debatable who won the day - the bulls or the bears.

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The weekend shows may have said it was the jobs report that triggered more losses on Friday, and the 20,000 jobs created in February did come in well below estimates, but the overnight futures were down much more sharply before the jobs report was announced, then where the indices closed, so you could say there was a buy the news reaction to the jobs report. The unemployment rate moved down a couple of ticks to 3.8%.

In the short-term the indices had become quite oversold, being down 8 of the last 9 days as I mentioned, and may be due for some relief, but during the first 2+ months of the year every 2 to 3 day dip was being bought so clearly something changed recently.

In the case of the Dow Transportation Index, which has been down for 11 straight days, it is now the longest losing streak since... 1972. Really? With the dot com bubble bursting, the financial crisis, the 1987 market crash, wars, terror attacks, and everything that has gone on in the last 47 years, the Transports have its longest losing streak now - a year that stocks are doing so well? Very strange.

For weeks into the New Year I have thought that the rally off the lows was part of one of those explosive bear market rallies that we had seen in the past, but it just kept going, and going, and that theory became less plausible as the upside continued. But recently the S&P 500 hit that 2815 level, and you'll see in the charts section below, that has been a tough area for the index to crack over the last year. But how tough will it be?

This chart from HulbertRatings.com shows other explosive rallies during prior bear markets and this recent big rally is actually in line with those bear market rallies, so it is not out of the question that the bear market may still be intact.



Does that mean you should sell everything and hide in a bunker? Maybe not. But it certainly should get your attention that big rallies in or after bear markets can be traps, and not always green lights to keep buying. We've had a pullback, but nothing serious yet and that's your choice going forward - whether to buy this dip or plan for more damage.

There's some concern coming into this new week about how solid the potential trade deal with China really is because after the bell on Friday there were questions about how the negotiation were going after Chinese leader Xi canceled plans to meet with President Trump at Mar-a-Lago later this month.

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The S&P 500 (C-fund) sold off early on Friday and the jobs report gave investors a reason to sell the open, but buyers did step up once the index neared the 50 and 200-day EMAs. We can see the brick wall at that 2815 level (red line) and the index fell back below the 200-day Simple average (orange), so there could be a struggle in this 2700 - 2800 area as the bull and bears battle it out.




The weekly chart shows that double top just above 2800 with some support near 2700, but more meaningful support may not be found until the 2600 area.




The DWCPF (S-fund) also found a place to bounce in the form of the 50 and 200-day EMAs, and that's typical action during the first test. The question is whether that will be the lows for this pullback, or if it was just a short-term, temporary place for the pullback to pause.




The Dow Transportation Index was down for an 11th straight day on Friday, a 47 year old record breaker, but it too reversed off the lows in late trading, and now that it is below both the 50 and 200-day EMAs, the bulls have a little work on their hands to reverse this new trend. Some kind of a relief rally is certainly a probable here, but the question will be how it handles those two averages on the way up.




The EFA (I-fund) had been holding up well, but the recent breakout in the dollar to new highs put too much pressure on it last week and it fell back below its 200-day EMA. It got a late bounce when U.S. stocks rebounded and the 50-day EMA is there for support, but the concern in Europe and Asia right now is the struggling economic growth.




On Friday the Chinese Shanghai Index, the Japanese Nikkei, and Hong Kong's hang Seng Index all fell 2% to 4% on the day after strong rallies to start the year. Also, the German DAX has been pulling back since hitting its 200 day average.




The AGG (F-fund) rallied again making new highs and yields continue to slip. It could just be a move to safety while stocks are stumbling, but clearly the bond market is showing some concerned about economic growth with this recent rally.




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 TSP Talk - Market Commentary

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