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TSP Talk: Stocks bounce back from early losses

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Stocks opened lower but rebounded on Thursday, grabbing back about 40% or so of Wednesday's losses, but it is from where the rebound started that was more important than the gains. The Dow was up 300-points, and the gains were fairly broad across most indices. By the close, advancing issues outnumbered declining by about 2 to 1 while share volume was 3 to 1 in favor of advancing issues over declining, after being under water for much of the day.

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The easing of the Volker rule gave the market a boost as this gave banks more freedom to make large investments into venture capital and similar funds, something that was restricted after the financial crisis. Many large bank stocks jumped 2% on the news, despite the Fed's stress test on the bank revealing that they will be required to suspend share buybacks and cap dividend payments at their current level for the third quarter of this year.

The jobless claims came in a little higher than expected, which added to the weak opening on Thursday, and the 3rd estimate of the GDP came in at -5.0 as had been expected.

Nike had a big miss on earnings yesterday after the bell which could set a negative tone today to some extent, but it's probably not a surprise that $300 sneakers weren't on many people's priority list over the last 3 months. I think I heard that 90% of their stores were closed last quarter so, it's hardly a good measure of their company's potential..

We saw some key moving averages hold on most of the charts, but we do see some yellow flags out there as support lines get cracked. Yesterday showed us that the rebalancing from pension funds may be over, but time-wise they can still do a lot of selling.

Today may be the most vulnerable day of the three trading days left in June. Yesterday's rebound could have set up some "sell the rally" opportunities if the bears are looking to take charge. But as we get closer to the holiday, the bulls will have the seasonal advantage, so it could be now or never for the bears.




The S&P 500 (C-fund) was down early on Thursday but the bears couldn't quite keep the pressure on and that allowed the bulls to post a rebound. It was a solid gain and the 50-day EMA did its jobs as support, but you can see that broken support line could now try to act as resistance, if the bulls can't follow through today on Thursday's gains.




We have a couple of flags on the chart. One is a bear flag (red), although the flag pole isn't all that big so it may not be a classic flag formation. The other is an odd looking bullish flag (blue), which is bullish, but I suppose it could still go all the way down to about 2900 and still be considered in the bull flag.




The DWCPF (S-fund) led on the upside yesterday after lagging badly on Wednesday. Once again the key support levels that needed to hold, did. That doesn't mean it will continue to hold, but so far, so good, here.




The EFA (I-fund) held its 200-day EMA yesterday, which is what the bulls were hoping for, so the story is the same here.




The Dow Transportation Index had fallen back below its 200-day EMA earlier this month, which was concerning since that area was also the top of the old trading channel it had already broken out from. Now it's looking to get some support from the 50-day EMA, and another inner trading channel support line. So far so good here too, but this one is a little sketchy with it still below its 200-EMA and the 50 EMA below the 200.




The yield on the 10-year Treasury was down again on Thursday helping the F-fund, but it also found support and reversed higher after hitting its rising support line. Below that the BND (bond ETF) made another attempt at a new high but closed off the highs when yields reversed up. There seems to be a lot of overhead resistance forming with a lot of open space on the downside.




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Thanks for reading. Have a great weekend!

Tom Crowley




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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)
BND (F Fund) (delayed)

(Stockcharts.com Real-time)

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