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Stocks bounce from last week's pullback

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Stocks rallied out of the gate on Monday after more dovish comments from Fed Chairman Jerome Powell over the weekend. The Dow lagged percentage-wise because of Boeing's stock dropping, but still gained 201-points on the day after being down 240+ near the open. Tech and the Nasdaq led and the Transports finally broke its 11-day losing streak.

Daily TSP Funds Return

After a rare down day on a Friday last week, stocks were able to rally on Monday, a day that has been relative weak all year, but it wasn't just a rally. It was a trend changer as far as it breaking the descending resistance from the decent decline. This could set up some short-term follow-through to the upside, but we still have concerns about that 2815 area on the S&P 500, and the global economic weakness so I don't want the rally to totally take our guard down about issues that are still out there.




One of those issues is the key vote on Brexit today, which could be a big problem for the market. But with European growth already in the tanker and probably all but priced in, maybe a little bad news from across the pond won't be taken too badly. But I suppose it could trigger some profit taking after yesterday's big rally.
Mid-March has a strong positive seasonal bias but as we get toward the latter half of the month - starting next week, things turnaround.


Chart provided courtesy of www.sentimentrader.com



The S&P 500 (C-fund) followed through on Friday's positive reversal to rally sharply and erase almost three days of last week's losses. So far any attempts to fill in that right shoulder of the inverted head and shoulder pattern has been limited, but there's no rule that says the shoulders have to be the same size. It would be a cleaner H&S pattern that way, so perhaps it will still happen, but no rule on how deep the shoulder has to go. So far the 50 and 200-day EMA's are holding.




The PMO indicator at the bottom of the chart above shows is crossing below the moving average. There has been a tendency for the first crossover to produce an imminent oversold rally to push it back over the moving average. Then, the second crossover gives the sharper move lower. That's what happened in November / December. So far we just got the first crossover so we may be seeing that relief / oversold rally.


The DWCPF (S-fund) had a big day and recaptured its 20-day EMA after bouncing off the 50 and 200 EMAs. The downtrend is broken and technically this looks fine - as long as it stays above those averages and can eventually move above the late February high.




The Dow Transportation Index broke its 47 year old record of being down 11 days in a row by gaining near 2% yesterday. Was it because of what the Fed said about the economy? It was more likely the positive reversal on Friday and some relief from the extreme oversold conditions.




The High Yield Corporate Bond Fund had a big day and that's music to the stock market's ears - particularly small caps who live and die on the access to credit.




The AGG (F-fund) was relative flat, which is interesting since bonds were rallying while stocks were falling, but they didn't rollover when stocks rebounded. That tells me that the bond investors was not as infatuated with Jerome Powell's dovish message about the economy over the weekend, as stock market investors.




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)

(Stockcharts.com Real-time)
DWCPF (S Fund) (delayed)

(Stockcharts.com Real-time)
EFA (I Fund) (delayed)

(Stockcharts.com Real-time)
AGG (F Fund) (delayed)

(Stockcharts.com Real-time)