Last weekend I started off by saying “The S&P 500 gained about 5 percent this week closing at 3193 (on Friday 5 June)”. Five percent gains are unusual, and we gave that back plus some in just one day on Thursday. The S&P closed the week at 3041, just about where we were on 29 May when the S&P 500 stood at 3044, starting this unusual two week round trip. So the big question is “What’s next?”. For that we can turn to last Wednesday when the Fed’s policy makers said they would maintain interest rates near zero, indicating they expect to keep rates at basement levels through 2022. As such, the Fed is indicating that the economy may take longer to recover than hoped. Then we have COVID second wave reopening fears as noted in states like Arizona where cases have nearly doubled since Memorial Day. From a technical perspective, this week could provide some perspective regarding the market’s future direction. If we take Thursday’s S&P 500 close of 3002 as a low support line and the recent two week closing high of 3232 on 8 June as the high resistance line, we could have the start of a range bound channel. As I always like to look back at similar instances, this could be reminiscent of the summer of 2019 when we had a flat consolidating market until we broke out to the upside in mid-October. Looking back outside the last two weeks, we need to go back to 23 March when the S&P 500 hit its COVID low of 2237. Since then we’ve had an historic rally and the market demand for equities may be drying up as people want to lock in some of their gains. Given the above environment, my concern is that we are closer to the bottom of that 230 point range and the likelihood of breaking out to the downside is more a of concern from strictly a numbers perspective. For TSP TIPS, these conditions led to our intraweek reallocation alert with taking some money off the table. If we do breakout to the downside, the next support line is at 2820 which was the 13 May S&P 500 close.
Last weekend I started off by saying “The S&P 500 gained about 5 percent this week closing at 3193 (on Friday 5 June)”. Five percent gains are unusual, and we gave that back plus some in just one day on Thursday. The S&P closed the week at 3041, just about where we were on 29 May when the S&P 500 stood at 3044, starting this unusual two week round trip. So the big question is “What’s next?”. For that we can turn to last Wednesday when the Fed’s policy makers said they would maintain interest rates near zero, indicating they expect to keep rates at basement levels through 2022. As such, the Fed is indicating that the economy may take longer to recover than hoped. Then we have COVID second wave reopening fears as noted in states like Arizona where cases have nearly doubled since Memorial Day. From a technical perspective, this week could provide some perspective regarding the market’s future direction. If we take Thursday’s S&P 500 close of 3002 as a low support line and the recent two week closing high of 3232 on 8 June as the high resistance line, we could have the start of a range bound channel. As I always like to look back at similar instances, this could be reminiscent of the summer of 2019 when we had a flat consolidating market until we broke out to the upside in mid-October. Looking back outside the last two weeks, we need to go back to 23 March when the S&P 500 hit its COVID low of 2237. Since then we’ve had an historic rally and the market demand for equities may be drying up as people want to lock in some of their gains. Given the above environment, my concern is that we are closer to the bottom of that 230 point range and the likelihood of breaking out to the downside is more a of concern from strictly a numbers perspective. For TSP TIPS, these conditions led to our intraweek reallocation alert with taking some money off the table. If we do breakout to the downside, the next support line is at 2820 which was the 13 May S&P 500 close.