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TSP Talk: Broad rally to start the week. Tech shines again

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Stocks opened flat to slightly lower on Monday but buyers stepped in quickly, setting a positive tone for the day, and the rally held into the close, fighting off a late morning pullback. The Dow gained 114-points, which was off the morning highs but the broader indices like the S&P, Nasdaq, and small caps, all closed strong and near their highs of the day.

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Optimism over a stimulus package and vaccine progress helped the market rally, and after the bell we did hear from the Senate GOP who proposed a wage replacement of 70% in extended unemployment benefits, replacing the $600 weekly enhancement, and it also included another round of $1,200 stimulus checks with $500 payments for dependents of any age.

Is it enough? The futures are up after hours, but just slightly so the market seems aware that there's more to be done before anything is finalized.

This week we will get earnings reports from some of the key FAANG companies as Apple, Amazon, and Google (Alphabet) report on Thursday, and yesterday we started another push higher from that market leading Nasdaq and Nasdaq 100 group. After the first two-day loss in months in the index on Friday, the Naz 100 did find support at the rising support line, and yesterday it jumped back over the 20-day EMA so at this point it appears to be game on again for the large techs. Perhaps we'll get a sell the news reaction after Thursday, but that depends what happens in the interim.

Right now the dollar's weakness, while somewhat concerning, is boosting the prices of mostly anything traded in dollars. Gold, silver, bitcoin, copper, lumber, and of course stocks, were all up yesterday with the sharp decline in the dollar. The intraday low came on a day in March when the world was on fire, but yesterday was the lowest close in a couple of years.

If we do see this oversold dollar bounce back it could trigger pullbacks in most of these sectors that have benefited from the weakness. There's some support right near yesterday's low (blue line) but that support is falling. A test of the March lows could keep those rallies in stocks going a while longer.

The S&P 500 (C-fund) had a positive reversal on Friday and Monday tacked onto that bounce so the 20-day EMA has held for another day. The trend is up, it closed back above the June highs, and the only immediate technical issue I see now is that old rising support line off the late June low, possibly becoming resistance - although that resistance is rising.

The DWCPF (S-fund) is still trying to hold above its rising support line and it closed right near the June closing high, but still below the July's closing highs. It had gotten quite extended above its 50-day EMA so the sideways consolidation over the last 7-weeks may have been what it needed to ease the extremes.

The EFA (I-fund) looks very similar to the small caps, but it is back above the June highs. This fund is certainly enjoying the weakness in the dollar.

The Dow Transportation Index was up nicely, but even better is that bullish looking flag which seems to be indicating it wants to test that June high again soon.

BND (bond ETF) is seeing a little volatility after several weeks of a slow grind higher. The trend and rising trading channels are still intact, but there was a little knock on the support line door yesterday before it closed right on that support.

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

Tom Crowley

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SPY (C Fund) (delayed)

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DWCPF (S Fund) (delayed)

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EFA (I Fund) (delayed)

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BND (F Fund) (delayed)

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