11/05/25
The bulls are scrambling after another AI shock with Palantir selling off despite a big beat on earnings, but there are concerns over the valuations of some of these ballooning stock prices. The prices were high and we have seen these stocks sell off before, but are they finally ringing the bell at the top? I still think the selling is more Fed related and their less dovish policy on rates, but so far that is just rhetoric, and rates are likely to come down again.
An adjustment in prices to bring valuations down would not be new. It happens all the time, but most of the leaders eventually come back to the old highs, and then some. The question is whether investors want to take the elevator ride down with them, or should let the market go down, and then hit the button to catch the elevator when it is coming back up?
I have been doing this for a long time and one of the biggest lessons I have learned over the years is to stop being so quick to sell in bull markets. The problem with that strategy is that you won't be selling the top and you tend to buy every dip until the market has fallen so much that the bull has turned into a bear. By then, you've accumulated some losses or shaved off some gains.
The fundamentals in Palantir after earnings were fine, although yes, it is priced to perfection and can get adjusted. As a technical analyst, the charts have to tell me the story because, outside of rudimentary knowledge, I don't fully understand the fundamental side of the companies. Now, please do not take this as a buy recommendation because I don't know enough about this company, but this chart looks really good to me. That could change today or next week, but right now this looks like bullish cup and handle formation, that broke out, and is now pulling back to test the breakout area. It also filled in a small gap near yesterday's low in the process.
I have no idea what is going to happen next, but from what I am seeing above, I think investors' sentiment may be leaning the wrong way. That's just text book C&H action. Check it out here.
The 10-year Treasury Yield has been stabilizing near that 50-day average. That doesn't mean it is going to hold, but so far it has. I inserted a small chart of the dollar ETF UUP which we watched trade along the 200 day average for several days before it broke above it, so that is certainly a possibility on $TNX.
The 2-Year Treasury Yield is what the Fed watches closely, although the tail wagged the dog last week when the Fed sent the 2-year higher. Now, like the 10-year, it is trying to hang around the 50-day average. If this can rollover, the stock market could bounce back quickly. If this continues higher, the market will start to more aggressively price in a no cut in December from the Fed.
The probability of an interest rate cut in December is at 70%, which is clearly a good chance of occurring, but the problem is it has fallen from 91% before the Fed meeting, and that's what has investors concerned as they make adjustments to this new development.
The DWCPF Index (S-Fund) gets the spotlight today as the chart closed below its 50-day average for only the second time in months. Only the day of President Trump's tariff post regarding China saw a close below that average, and we'd have to go back to early May, which is off the chart, to see the prior time it did so. This is a crack and like in October, this needs to repair itself quickly or gravity could take over.
Here is the Russell 2000 small caps index (not our S-fund, but related) and it closed just above the 50-day average. The red 30-day average was broken yesterday and it had only broken once on a closing basis in the lat three months, and that was the same day as the Trump post.
The S&P 500 (C-fund) is holding up better and right now it is just filling those gaps, as we suspected that it could try to do. In the process however, a short-term trading channel was broken. Otherwise, the pullback has taken down to the breakout line, which is typical pullback action and not yet too concerning.
I have mentioned before how a crossover of the PMO indicator above its moving average is bullish, but often a sign of being overbought in the short-term, and the bulls don't want to see it cross back below the average. The entire indicator is still trending lower however, and that's been a concern of mine, but it hasn't hurt the index yet.
I have grown tired of trying to decipher what the "market leading" Dow Transportation Index is trying to tell us, since it hasn't been much of a leader lately, but for what it's worth, it was up 79-points, or 0.50% yesterday.
In a recent interview, President Trump said that the economy could be in big trouble ("will go to hell", were his actual words) if the Supreme Court rules against his current tariff plan. Is the market bracing for that decision?
We are supposed to get the October jobs report on Friday, but with the government still shut down, that may not happen.
ACWX (I-fund) got hit hard but still outperformed the small caps of the S-fund, despite the dollar rallying again. It looks like the bottom of the channel and the 50-day EMA are serious potential targets on the downside. A day ago I thought it could avoid that.
BND (bonds / F-fund) was up as yields moved slightly lower. The chart has some serious cracks on it but it is still above the 50-day EMA so, for the optimist, the trend is still technically up.
Thanks so much for reading! We'll see you 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.
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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 use additional methods and strategies to determine fund positions.
The bulls are scrambling after another AI shock with Palantir selling off despite a big beat on earnings, but there are concerns over the valuations of some of these ballooning stock prices. The prices were high and we have seen these stocks sell off before, but are they finally ringing the bell at the top? I still think the selling is more Fed related and their less dovish policy on rates, but so far that is just rhetoric, and rates are likely to come down again.
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An adjustment in prices to bring valuations down would not be new. It happens all the time, but most of the leaders eventually come back to the old highs, and then some. The question is whether investors want to take the elevator ride down with them, or should let the market go down, and then hit the button to catch the elevator when it is coming back up?
I have been doing this for a long time and one of the biggest lessons I have learned over the years is to stop being so quick to sell in bull markets. The problem with that strategy is that you won't be selling the top and you tend to buy every dip until the market has fallen so much that the bull has turned into a bear. By then, you've accumulated some losses or shaved off some gains.
The fundamentals in Palantir after earnings were fine, although yes, it is priced to perfection and can get adjusted. As a technical analyst, the charts have to tell me the story because, outside of rudimentary knowledge, I don't fully understand the fundamental side of the companies. Now, please do not take this as a buy recommendation because I don't know enough about this company, but this chart looks really good to me. That could change today or next week, but right now this looks like bullish cup and handle formation, that broke out, and is now pulling back to test the breakout area. It also filled in a small gap near yesterday's low in the process.
I have no idea what is going to happen next, but from what I am seeing above, I think investors' sentiment may be leaning the wrong way. That's just text book C&H action. Check it out here.
The 10-year Treasury Yield has been stabilizing near that 50-day average. That doesn't mean it is going to hold, but so far it has. I inserted a small chart of the dollar ETF UUP which we watched trade along the 200 day average for several days before it broke above it, so that is certainly a possibility on $TNX.
The 2-Year Treasury Yield is what the Fed watches closely, although the tail wagged the dog last week when the Fed sent the 2-year higher. Now, like the 10-year, it is trying to hang around the 50-day average. If this can rollover, the stock market could bounce back quickly. If this continues higher, the market will start to more aggressively price in a no cut in December from the Fed.
The probability of an interest rate cut in December is at 70%, which is clearly a good chance of occurring, but the problem is it has fallen from 91% before the Fed meeting, and that's what has investors concerned as they make adjustments to this new development.
The DWCPF Index (S-Fund) gets the spotlight today as the chart closed below its 50-day average for only the second time in months. Only the day of President Trump's tariff post regarding China saw a close below that average, and we'd have to go back to early May, which is off the chart, to see the prior time it did so. This is a crack and like in October, this needs to repair itself quickly or gravity could take over.
Here is the Russell 2000 small caps index (not our S-fund, but related) and it closed just above the 50-day average. The red 30-day average was broken yesterday and it had only broken once on a closing basis in the lat three months, and that was the same day as the Trump post.
The S&P 500 (C-fund) is holding up better and right now it is just filling those gaps, as we suspected that it could try to do. In the process however, a short-term trading channel was broken. Otherwise, the pullback has taken down to the breakout line, which is typical pullback action and not yet too concerning.
I have mentioned before how a crossover of the PMO indicator above its moving average is bullish, but often a sign of being overbought in the short-term, and the bulls don't want to see it cross back below the average. The entire indicator is still trending lower however, and that's been a concern of mine, but it hasn't hurt the index yet.
I have grown tired of trying to decipher what the "market leading" Dow Transportation Index is trying to tell us, since it hasn't been much of a leader lately, but for what it's worth, it was up 79-points, or 0.50% yesterday.
In a recent interview, President Trump said that the economy could be in big trouble ("will go to hell", were his actual words) if the Supreme Court rules against his current tariff plan. Is the market bracing for that decision?
We are supposed to get the October jobs report on Friday, but with the government still shut down, that may not happen.
ACWX (I-fund) got hit hard but still outperformed the small caps of the S-fund, despite the dollar rallying again. It looks like the bottom of the channel and the 50-day EMA are serious potential targets on the downside. A day ago I thought it could avoid that.
BND (bonds / F-fund) was up as yields moved slightly lower. The chart has some serious cracks on it but it is still above the 50-day EMA so, for the optimist, the trend is still technically up.
Thanks so much for reading! We'll see you 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 use additional methods and strategies to determine fund positions.
