01/26/26
Stocks sold off last Tuesday to start the holiday shortened week, but they quickly found support, spending the next few days trying to recapture those losses. Friday was a mixed bag as stocks rallied early, but faded and we saw the Dow, and particularly the recent hot small caps, end the week on a down note. The dollar got slammed on Friday while yields spent the last few days filling a gap.
The action last week, and on Friday, was different, but is it the start of a change? We have a lot going on this week that may be somewhat responsible for the shift.
We will get a two day Fed FOMC meeting starting on Tuesday. No rate cut is expected, but any changes to their monetary policy or commentary from Powell afterward, particularly after his recent public reaction to the investigation into the $2.5 renovation to the Federal Reserve building, could move the market.
We will also get earnings from three of the Magnificent 7 companies this week: Tesla, Microsoft, and Apple.
And another government shutdown is looming at the end of the week as Democrats in the Senate say they will not approve a spending bill if it includes money for the Department of Homeland Security.
Many charts did a good job last week of filling in the large gaps opened last Tuesday. After breaking out the prior week, the 10-year Treasury Yield rallied early last week on the combination of the Greenland geopolitical battle, including tariff threats, but also the rapid elevation of yields in the Japanese Bond market. That gaps has now been filled.
But take a look at what the dollar did on Friday, as the sell off moved down to test key support. If this breaks down, the I-fund becomes more attractive again.
However, in the grand scheme of things, the move looks insignificant on a 4+ year chart. With inflation sticky, but stable, the dollar may move lower. We saw what happened to the dollar during the inflation ridden years of 2021 and 2022. It is still slightly above that 2022 peak now, but if the weakness continues this week, it could threaten to break below long term support line near 26.50.
That decline in early 2025 accounted for most of the I-fund's leading performance last year. A breakdown below 26.50 could give us a replay.
Here's that chart of Japan's 10-year Treasury Yield. It too did some backing and filling of the open gap created last Tuesday, but it headed back up on Friday. The move has been significant, and now it's at a point where the US market is paying attention, and concerned.
The S&P 500 (C-fund) is in a bullish uptrend but also remains in the Wyckoff Distribution pattern that has given chart technicians some concern. The area near 6950 is the place to watch. New highs could negate that bearish pattern, but if this stalls and rolls over here, investors may be on high alert for a peak, as defined by the Wyckoff Distribution pattern. Why the market would peak here, I don't know, but there's a lot going on right now and stocks have been rallying since the lows on 2022, with last year's temporary tariff tantrum thrown in there.
The market leaders have been doing great lately, suggesting good things may be coming for the S&P 500 as well, but both the Dow Transportation Index and the Russell 20000 small caps got hit hard on Friday.
Keep an eye on the 260 -255 areas for support on the IWM. Any move below that old resistance line could be trouble, but it held on the first test last Tuesday, and if small caps want to continue to lead this year, it needs to hold again, especially with the dollar helping the I-fund.
Additional TSP Fund Charts:
The DWCPF (S-fund) pulled back sharply on Friday, and unlike the IWM small caps chart up top, this one is already testing the old resistance line, which is now trying to act as support. Typically this will hold after a breakout from a beautiful inverted head and shoulders pattern like we see below, but that open gap near 2525 is always a potential pullback target.
The ACWX (I-fund) made new highs on Friday and it is behaving very well, and that big sell off in the dollar on Friday was the reason the I-fund was the only TSP stock fund to end the week with a gain. It was up 1.05% for the week after Friday's 0.50%.
BND (bonds / F-fund) also had a small gain last week, although the G-fund actually outperformed the F-fund by a tick. The chart filled in Tuesday's open gap and survived a breakdown scare after falling below the 50-day average last Tuesday. Now it is retracing those large losses from those negative candlesticks, but this may have some trouble going forward, or at least getting above 74.40, depending on what happens with Japan's bonds.
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
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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.
Stocks sold off last Tuesday to start the holiday shortened week, but they quickly found support, spending the next few days trying to recapture those losses. Friday was a mixed bag as stocks rallied early, but faded and we saw the Dow, and particularly the recent hot small caps, end the week on a down note. The dollar got slammed on Friday while yields spent the last few days filling a gap.
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The action last week, and on Friday, was different, but is it the start of a change? We have a lot going on this week that may be somewhat responsible for the shift.
We will get a two day Fed FOMC meeting starting on Tuesday. No rate cut is expected, but any changes to their monetary policy or commentary from Powell afterward, particularly after his recent public reaction to the investigation into the $2.5 renovation to the Federal Reserve building, could move the market.
We will also get earnings from three of the Magnificent 7 companies this week: Tesla, Microsoft, and Apple.
And another government shutdown is looming at the end of the week as Democrats in the Senate say they will not approve a spending bill if it includes money for the Department of Homeland Security.
Many charts did a good job last week of filling in the large gaps opened last Tuesday. After breaking out the prior week, the 10-year Treasury Yield rallied early last week on the combination of the Greenland geopolitical battle, including tariff threats, but also the rapid elevation of yields in the Japanese Bond market. That gaps has now been filled.
But take a look at what the dollar did on Friday, as the sell off moved down to test key support. If this breaks down, the I-fund becomes more attractive again.
However, in the grand scheme of things, the move looks insignificant on a 4+ year chart. With inflation sticky, but stable, the dollar may move lower. We saw what happened to the dollar during the inflation ridden years of 2021 and 2022. It is still slightly above that 2022 peak now, but if the weakness continues this week, it could threaten to break below long term support line near 26.50.
That decline in early 2025 accounted for most of the I-fund's leading performance last year. A breakdown below 26.50 could give us a replay.
Here's that chart of Japan's 10-year Treasury Yield. It too did some backing and filling of the open gap created last Tuesday, but it headed back up on Friday. The move has been significant, and now it's at a point where the US market is paying attention, and concerned.
The S&P 500 (C-fund) is in a bullish uptrend but also remains in the Wyckoff Distribution pattern that has given chart technicians some concern. The area near 6950 is the place to watch. New highs could negate that bearish pattern, but if this stalls and rolls over here, investors may be on high alert for a peak, as defined by the Wyckoff Distribution pattern. Why the market would peak here, I don't know, but there's a lot going on right now and stocks have been rallying since the lows on 2022, with last year's temporary tariff tantrum thrown in there.
The market leaders have been doing great lately, suggesting good things may be coming for the S&P 500 as well, but both the Dow Transportation Index and the Russell 20000 small caps got hit hard on Friday.
Keep an eye on the 260 -255 areas for support on the IWM. Any move below that old resistance line could be trouble, but it held on the first test last Tuesday, and if small caps want to continue to lead this year, it needs to hold again, especially with the dollar helping the I-fund.
Additional TSP Fund Charts:
The DWCPF (S-fund) pulled back sharply on Friday, and unlike the IWM small caps chart up top, this one is already testing the old resistance line, which is now trying to act as support. Typically this will hold after a breakout from a beautiful inverted head and shoulders pattern like we see below, but that open gap near 2525 is always a potential pullback target.
The ACWX (I-fund) made new highs on Friday and it is behaving very well, and that big sell off in the dollar on Friday was the reason the I-fund was the only TSP stock fund to end the week with a gain. It was up 1.05% for the week after Friday's 0.50%.
BND (bonds / F-fund) also had a small gain last week, although the G-fund actually outperformed the F-fund by a tick. The chart filled in Tuesday's open gap and survived a breakdown scare after falling below the 50-day average last Tuesday. Now it is retracing those large losses from those negative candlesticks, but this may have some trouble going forward, or at least getting above 74.40, depending on what happens with Japan's bonds.
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 use additional methods and strategies to determine fund positions.
