We got the typical Monday morning weakness after a Friday sell off, but we did see the bulls show up and take the indices off the early lows, and some closed in positive territory. The Dow ended the day with a 900-point positive swing and the S&P 500 is attempting to create a double bottom, although its too early for the bulls to claim victory. Bonds were up and the I-fund lagged.
The indices had gotten a little oversold after 3 days of selling and another 90+ point loss to start the day in the S&P 500 on Monday, so a bounce at some point was not too surprising, but it's where it started its bounce that was intriguing. It was looking like the rebound off the recent lows was failing, and after Friday's plunge, it seemed inevitable that we'd be testing the prior lows made earlier in March.
That's exactly what happened on Monday, but after the decline below the prior lows which took out some stops, we saw a possible classic retest, capitulation, and rebound. It ay or not be "the" low but, but the chart did improve and the possibility of a double bottom is now out there. It wasn't exactly capitulation-like trading volume as you'll see in the index charts down below, but it was elevated - most likely due to it being the end of quarter.
Market breadth was mixed with the Nasdaq much more negative than the NYSE, which had a 3 to 2 advancing volume over declining. New lows were off the charts lopsided because of the lows made in the morning in the indices.
The end of a quarter means there may have been some window dressing and pension rebalancing involved with those monthly losses causing some money managers to sell bonds and buy stocks to make sure their portfolios maintained their proper prospectus allocations that they advertise. But bonds didn't go down so I look at that as strength (for the F-fund), especially if those gains hold again today.
The charts are certainly not out of the woods yet. Last week's 90% down volume day is usually a sign that there's more downside to come, but outside of capitulation-like selling on Monday morning, that hasn't changed.
The market is still looking at those tariffs and their implications to the economy and corporate earnings, and after a 10% decline, investors are considering whether the uncertainty is priced in. That sounds like a oxymoron as it would be difficult to price on the unknown.
"h" formations, which are basically bear flags that test the prior lows like we see now, don't normally end well unless we get a clean double bottom and this ends up being a successful test of that early March low. The S&P 500 (C-fund) declined sharply on Friday and that created an ugly bear flag breakdown. After Friday's action we figured a test of the lows was next and of course we got that test of the lows but it barely lasted an hour before the double bottom buyers were doing their thing. That's a decent looking reversal but there's that "h" and the precipitous drop usually means it won't go straight back up -- the old dead cat bounce syndrome. That is, if you drop something from far enough up, it will bounce when it hits the floor, but it may not have a lot of strength.
There is that possibility of a new month / new quarter reversal, plus we have the other possibility that this was a "sell the rumor, buy the news" situation when it comes to tariffs as they begin tomorrow.
I looked back at a few prior lows and attempted lows, similar to yesterday's commentary, and I actually came to the conclusion that -- you never know. I could probably go back a lot further and get more data and a better conclusion, but I don't have room here. For now, here's a bunch of more recent outcomes from bear flags and attempted double bottoms. Some succeeded and some failed.
Bonds continue to do well for one reason or another - either inflation is falling, or the economic growth is - or both, although the Fed still seems to be concerned about inflation, but the bond market isn't showing that. Whatever it is, this is a bear flag on the 10-year yield and it looks like it may want to go lower.
That would be bullish for bonds and the F-fund as they do the opposite of yields, and you can see the bull flag on the BND chart.
I had a hefty loss in March and my positions and trading strategy is a little more nuanced than the average investor, but for an average investors who may be lucky enough to have missed the decline and have some cash, it is probably a good time to start adding stocks back into your portfolio. Because I watch the market much more closely I have some more specific ideas about what could happen in the short-term, where mom and pop is looking further down the road. Although it may feel like it, another 1% to 5% loss from here wouldn't kill anybody if we knew that was going to be the lows, so yes, the short term and long term investors may not approach things the same way, and they may both be correct.
This week's economic highlight will be the March Jobs Report which comes out on Friday morning.
The DWCPF (S-fund) also tested and held at its previous low, which looks promising, but so far it really only filled in Monday's opening gap. There's more to prove here, but as long as the 2000 area holds, the bulls may keep the edge. Anything below 2000 means a new leg down is possible and probable.
The ACWX (I-fund) lagged yesterday and got sandwiched in between the 50 and 100-day moving averages. It too tested some lows from early March. The blue "F" flag broke down, which is what they tend to do, and the 54.50 - 54.75 area looks like its line in the sand for support and test of its double bottom.
Thanks so much for reading! We'll see you back here tomorrow.
Tom Crowley
Read more in today's TSP Talk Plus Report. We post more charts, indicators and analysis, plus discuss the allocations of the TSP and ETF Systems. For more information on how to gain access and a list of the benefits of being a subscriber, please go to: www.tsptalk.com/plus.php
Questions, comments, or issues with today's commentary? We can discuss it in the Forum.
Daily Market Commentary Archives
For more info our other premium services, please go here... www.tsptalk.com/premiums.php
To get weekly or daily notifications when we post new commentary, sign up HERE.
Posted daily at www.tsptalk.com/comments.php
The legal stuff: This information is for educational purposes only! This is not advice or a recommendation. We do not give investment advice. Do not act on this data. Do not buy, sell or trade the funds mentioned herein based on this information. We may trade these funds differently than discussed above. We may use additional methods and strategies to determine fund positions.
| Daily TSP Funds Return
More returns |
The indices had gotten a little oversold after 3 days of selling and another 90+ point loss to start the day in the S&P 500 on Monday, so a bounce at some point was not too surprising, but it's where it started its bounce that was intriguing. It was looking like the rebound off the recent lows was failing, and after Friday's plunge, it seemed inevitable that we'd be testing the prior lows made earlier in March.
That's exactly what happened on Monday, but after the decline below the prior lows which took out some stops, we saw a possible classic retest, capitulation, and rebound. It ay or not be "the" low but, but the chart did improve and the possibility of a double bottom is now out there. It wasn't exactly capitulation-like trading volume as you'll see in the index charts down below, but it was elevated - most likely due to it being the end of quarter.
Market breadth was mixed with the Nasdaq much more negative than the NYSE, which had a 3 to 2 advancing volume over declining. New lows were off the charts lopsided because of the lows made in the morning in the indices.
The end of a quarter means there may have been some window dressing and pension rebalancing involved with those monthly losses causing some money managers to sell bonds and buy stocks to make sure their portfolios maintained their proper prospectus allocations that they advertise. But bonds didn't go down so I look at that as strength (for the F-fund), especially if those gains hold again today.
The charts are certainly not out of the woods yet. Last week's 90% down volume day is usually a sign that there's more downside to come, but outside of capitulation-like selling on Monday morning, that hasn't changed.
The market is still looking at those tariffs and their implications to the economy and corporate earnings, and after a 10% decline, investors are considering whether the uncertainty is priced in. That sounds like a oxymoron as it would be difficult to price on the unknown.
"h" formations, which are basically bear flags that test the prior lows like we see now, don't normally end well unless we get a clean double bottom and this ends up being a successful test of that early March low. The S&P 500 (C-fund) declined sharply on Friday and that created an ugly bear flag breakdown. After Friday's action we figured a test of the lows was next and of course we got that test of the lows but it barely lasted an hour before the double bottom buyers were doing their thing. That's a decent looking reversal but there's that "h" and the precipitous drop usually means it won't go straight back up -- the old dead cat bounce syndrome. That is, if you drop something from far enough up, it will bounce when it hits the floor, but it may not have a lot of strength.
There is that possibility of a new month / new quarter reversal, plus we have the other possibility that this was a "sell the rumor, buy the news" situation when it comes to tariffs as they begin tomorrow.
I looked back at a few prior lows and attempted lows, similar to yesterday's commentary, and I actually came to the conclusion that -- you never know. I could probably go back a lot further and get more data and a better conclusion, but I don't have room here. For now, here's a bunch of more recent outcomes from bear flags and attempted double bottoms. Some succeeded and some failed.
Bonds continue to do well for one reason or another - either inflation is falling, or the economic growth is - or both, although the Fed still seems to be concerned about inflation, but the bond market isn't showing that. Whatever it is, this is a bear flag on the 10-year yield and it looks like it may want to go lower.
That would be bullish for bonds and the F-fund as they do the opposite of yields, and you can see the bull flag on the BND chart.
I had a hefty loss in March and my positions and trading strategy is a little more nuanced than the average investor, but for an average investors who may be lucky enough to have missed the decline and have some cash, it is probably a good time to start adding stocks back into your portfolio. Because I watch the market much more closely I have some more specific ideas about what could happen in the short-term, where mom and pop is looking further down the road. Although it may feel like it, another 1% to 5% loss from here wouldn't kill anybody if we knew that was going to be the lows, so yes, the short term and long term investors may not approach things the same way, and they may both be correct.
This week's economic highlight will be the March Jobs Report which comes out on Friday morning.
The DWCPF (S-fund) also tested and held at its previous low, which looks promising, but so far it really only filled in Monday's opening gap. There's more to prove here, but as long as the 2000 area holds, the bulls may keep the edge. Anything below 2000 means a new leg down is possible and probable.
The ACWX (I-fund) lagged yesterday and got sandwiched in between the 50 and 100-day moving averages. It too tested some lows from early March. The blue "F" flag broke down, which is what they tend to do, and the 54.50 - 54.75 area looks like its line in the sand for support and test of its double bottom.
Thanks so much for reading! We'll see you back here tomorrow.
Tom Crowley
Read more in today's TSP Talk Plus Report. We post more charts, indicators and analysis, plus discuss the allocations of the TSP and ETF Systems. For more information on how to gain access and a list of the benefits of being a subscriber, please go to: www.tsptalk.com/plus.php
Questions, comments, or issues with today's commentary? We can discuss it in the Forum.
Daily Market Commentary Archives
For more info our other premium services, please go here... www.tsptalk.com/premiums.php
To get weekly or daily notifications when we post new commentary, sign up HERE.
Posted daily at www.tsptalk.com/comments.php
The legal stuff: This information is for educational purposes only! This is not advice or a recommendation. We do not give investment advice. Do not act on this data. Do not buy, sell or trade the funds mentioned herein based on this information. We may trade these funds differently than discussed above. We may use additional methods and strategies to determine fund positions.
