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| Today's Commentary |
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Strong open holds As the overnight futures suggested, stocks gapped open higher on Monday morning, and were able to hold onto the gains closing near the highs of the day. The Dow ended the day up 208-points. For the TSP, the C-fund jumped 2.20% on Monday, the S-fund gained 1.90%, and the I-fund led the way with a 2.88% gain as the dollar fell again. The F-fund (bonds) was down 0.18%. The S&P 500 is in a really interesting situation. It broke back above the 200-day Simple Moving Average (SMA) yesterday after overtaking the 50 and 200-day EMA's (exponential) several days before. Yesterday's big rally was on very light volume and it took the index up toward the top of the rising wedge - generally a bearish formation. The 50-day EMA is now back above the 200-day EMA, which puts the market back into a bull market "officially".  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk The rally could have more room to run but the market is overbought and near that rising resistance, so the short-term may see a little bit of a pause, and that MACD indicator continues to give us a negative divergence as the S&P has now made two higher highs, while the MACD has made two lower highs. While the S&P made that higher high (along with the Dow) the market leaders - Transportation Index and the Nasdaq - have not quite made a higher high, which could be a slight negative, but they have been leading the push higher in July. 
 Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk The Nasdaq now has an open gap to deal with. Monday morning gap opens don't always hold up very well and tend to get filled rather quickly, so I was impressed that the market was able to hold onto the gains right into the close, but the test will come now as we head into jobs report Friday when folks may be looking to book some profits. As we mentioned yesterday, stocks and bond yields tend to move in the same direction. Yields did not break down yesterday as the 2.9% area is holding so far, but they are still in a downtrend.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk The dollar continues to get hit hard as it fell another 0.7% yesterday helping stocks, and particularly the I-fund, rally. It has not been able to rebound off of the 200-day EMA, and appears to be in trouble technically, although due for a little bounce - perhaps up to the 200-day EMA and the upper end of the trading channel.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk While we are seeing signs that the bull market may be back, I am reluctant to use an August Interfund transfer right now with the market this overbought and this close to overhead resistance. I am also not totally convinced that this bull market rally is for real, but as we saw in 2007-2008, we can get some very big bear market rallies, and if you can make some money in a bear market, take it. Thanks for reading! We'll see you back here tomorrow. Tom Crowley |