TSP Talk Blog

Stocks were mixed on Thursday and a very late rally took the Dow (+12-points) back into positive territory. The S&P 500, small caps, and the Nasdaq were down modestly, while the Transports rocketed higher on a second straight big rally in the airline stocks. Yields rallied for a second straight day after that surprise ADP employment number on Wednesday, adding pressure to the bond market, which was down relatively sharply.

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Yesterday was a day that saw money move into some of the virus beaten down stocks. American Airlines was near $10 a couple of weeks ago when an analyst came out with a price target of $1. They anticipated a 90% decline. Yesterday American Airlines closed at 16.74, up 41% on the day. That's the kind of buying frenzy we are seeing... investors want to put money to work and yesterday the airlines were the soup du jour.

Similarly, the casino stocks did very well after Vegas casinos opened up yesterday. The problem is, there is limited gaming seating, no sports to bet on yet, no buffets, and the restaurants have fewer tables. Should the stocks rally up to the old highs with this kind of revenue?

The Gap posted earnings after the bell yesterday and their sales fell 43%. No surprise there. Their stock being up 140% since the lows is a surprise. It is still down 33% from the February lows, however. It's just tough to put prices on things, especially when many companies aren't giving forward guidance.

You may not know Mohammad El-Erian by name, but you may recognize him as a frequent respected guest on CNBC. He's the chief economic advisor at Allianz.



After the bell yesterday they asked him his views on the stock market and he said, "I am so happy that I'm not managing other people's money, because I wouldn't know what to do. I would be so torn between, on the one hand, concerns about the fundamentals. I think we are getting ahead of the reopenings, and the airlines are a perfect example of that. But on the other hand respecting the Fed's support. I'm really glad I don't have to make that decision."

He added that he likes the "high quality names - the ones that would do well both stay at home, and reopen - big tech as an example, but I sold out recently because I feel at these valuations, I just don't want to bet on moral hazard."

It's Friday and we get the May jobs report this morning an hour before the opening bell. It will be bad, but the question is always about where it comes in relative to expectations. Estimates are looking for a loss of 8.5 million jobs, and an unemployment rate of about 20%.

With that matzah ball sitting out there, let's just move on and see what happens. We've seen a huge run up to this anticipated report so there could be a sell the news reaction. Or, if it comes inline or better than expected, perhaps investors will feel emboldened to just keep buying.

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The S&P 500 (C-fund) was down modestly and is just below a cluster of potential resistance. Momentum remains on the bullish side and we may need an awful jobs report to change that.




The DWCPF (S-fund) was down on Thursday after a decent 4-day rally. The technical picture keeps improving as it moved above the 200-day EMA this week and rides above the rising support line. It is due for a rest, but there's no rule that says it has to, but a concerning jobs report could do that.




The Nasdaq 100 hit its February high yesterday, then backed off and closed down 0.77%. We have a perfect set up for a double top pullback, but is momentum too strong to see that?




The Dow Transportation Index got a big boost from the airlines yesterday, and that was enough to push the index above two levels of resistance. Is this for real, or a fake out?




The EFA (I-fund) took a breather yesterday and dipped back below the 200-day SMA.




The BND (F-fund) pulled back sharply yesterday with yields rallying strongly to a 10-week high. The 20-day EMA is being tested for a second time in a month. The last one failed, but bounced back quickly afterward. The jobs report may make this more clear for us.




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