TSP Talk Blog

Stocks started the new holiday shortened week with a breakout above some key levels on the charts, but the close was a slight disappointment. The Dow gained 530-points, while small caps outperformed again. The Nasdaq was suspiciously weaker than the rest of the market, and bonds and gold were down as we might expect after a 500-point rally.

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There was some very good action yesterday in stocks, but also some curious developments. We saw the S&P 500 explode at the open and that was enough to move it above the 200-day moving average, but it actually closed 0.5% below its opening price, and that pushed it back below the 200 MA.

What did Apple, Amazon, Facebook and Microsoft have in common yesterday? They were all down on the day. Say what? The Dow was up over 500-points and the market leaders were down?

Maybe that's good, maybe not. Remember how we talked about how the Equal Weight S&P 500 index had been lagging badly while the big tech stocks have been the driving force behind the recent rally in the S&P 500 index, because they are weighted so heavily? Yesterday was a flip flop of that as the equal Weight Index shined gaining 3.24%...



... while the Nasdaq 100 large cap techs struggled all day after the overnight futures rally, which peaked at about 4 AM CT on Tuesday morning.




I thought it was interesting that the market rallied last week on positive vaccine trials from Moderna, yet look what the stock has done since as the hype may have been overplayed by the company, yet stocks in general remained higher.




So, it looks likes stocks are looking for a reason to continue to rally, but they're running out of reasons. We have to wait until June 5 to get the May jobs report, which will be a doozy, but the market is obviously looking past that, but how far should it be looking?

The bears have been wrong, and I have been a bear. I feel the indices look exhausted up here in this area of the charts, but I was saying the same thing when they were up here in April and while we did see some consolidation since the April highs, the downside has been elusive.

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The S&P 500 (C-fund) gapped up for a second straight week, and both of those gaps remain open. 3000 was hit and turned back yesterday, as was the 200-day Simple Moving Average (SMA), but those were more impressive gains despite some weak developments in the chart including a negative reversal day. Still, it has now closed above the 200-day EMA (exponential average) for a 4th straight day and can prove something if it can make it 5. It's at the top of a parallel trading channel (blue range) so the bears have their chance again. Will they take it?




The DWCPF (S-fund) gapped above its 200-day EMA, very impressive, but remains below the 200-day SMA so we could still consider this the top of a rally. The bulls still have the momentum and the bears have shown very little yet.




The EFA (I-fund) made a big move higher on Tuesday and the decline in the dollar helped. You can see that it is still right between the 50 and 200 day EMAs and the rising trading channel, so there is still room on either side for this to roam.




The High Yield Corporate Bonds had a solid day closing back above its 200-day EMA but it remains below the 200-day SMA, where it stalled in April.




The BND (F-fund) hit and stopped at the April high twice last week and today it wasn't even able to hit that level again. There is some short-term rising support coming up from underneath so the battle between support and resistance is on this week.




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

Tom Crowley



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