Stocks pulled back from Friday's rally but as we've seen more often recently, the losses varied dramatically depending on the index. The Dow lost 85-points giving back more than the 33 it gained on Friday, as did the small caps which lost 0.79% on Monday. The S&P 500 gave back less than half of Friday's gains, and the Nasdaq gave back virtually none of the 144-point gain from Friday.
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The Transportation Index, which gained 0.51% on Friday, dropped another 1.3% on Monday and that chart is starting to look a little suspect, as you will see below, but it could also be considered in a bull flag so it's not an easy call yet. But the Transports are the market leaders and that's why whichever way it breaks matters.
One of the catalysts on Monday was the rumor that any corporate tax cut in a new tax bill may be phased in incrementally until 2022, rather than changing it to 20% all at once. Small caps seemed to take that news the hardest, but the losses may have told us something rather important. That is, the proposed tax cuts may be priced in already, more than we think and so a "sell the news" reaction, to a tax plan, is a serious possibility.
The FOMC meeting is scheduled for today and Wednesday with a policy statement scheduled for Wednesday afternoon. There will be no press conference by Yellen so most are not expecting any changes in rates but with the latest strong economic data, they could surprise us with more of a hawkish outlook.
We get the October jobs report on Friday and estimates are looking for a lofty gain of 300,000 jobs and an unemployment rate of 4.3%.
The SPY (S&P 500 / C-fund) was down slightly yesterday and closed in that area that we've been watching where rising support is trying to hold and while overhead resistance is also holding. Something will have to give soon since some of those lines are converging.
The DWCPF (small caps / S-fund) pulled back as it tested both the top and bottom of that flag-like formation, and the sideways consolidation resumes. The 20-day EMA held again, and that is key because below that there is a lot of open air with little support.
The Dow Transportation Index gave back most of the gains from last Thursday and Friday and remains in what could turn out to be a bull flag (red). We've seen a few lower lows being made so we are also watching to see if this is some kind of intermediate-term rounded top (blue) being formed.
The EAFE (I-fund) was up nicely, 0.49%, and once again it had a lot to do with the dollar losing 0.49% on the day.
The dollar slipped as mentioned and you can see that the 200-day EMA held as resistance and yesterday's dip filled a small open gap (blue). There are a couple more open gaps below in red that could be downside targets, but support is rising and currently sitting near 24.30, so the upside trend is still intact for now.
The AGG (Bonds / F-fund) rallied nicely, filled two open gaps, which we talked about yesterday, but the trend is down and it would not be a surprise to see the descending resistance hold it back before the week is up. The Fed's FOMC meeting could have bond traders / investors nervous since the economic data has been stronger than expected lately, and that could mean high rates (lower bond prices).
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
Thanks for reading. We'll see you back here tomorrow.
Tom Crowley
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.
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One of the catalysts on Monday was the rumor that any corporate tax cut in a new tax bill may be phased in incrementally until 2022, rather than changing it to 20% all at once. Small caps seemed to take that news the hardest, but the losses may have told us something rather important. That is, the proposed tax cuts may be priced in already, more than we think and so a "sell the news" reaction, to a tax plan, is a serious possibility.
The FOMC meeting is scheduled for today and Wednesday with a policy statement scheduled for Wednesday afternoon. There will be no press conference by Yellen so most are not expecting any changes in rates but with the latest strong economic data, they could surprise us with more of a hawkish outlook.
We get the October jobs report on Friday and estimates are looking for a lofty gain of 300,000 jobs and an unemployment rate of 4.3%.
The SPY (S&P 500 / C-fund) was down slightly yesterday and closed in that area that we've been watching where rising support is trying to hold and while overhead resistance is also holding. Something will have to give soon since some of those lines are converging.
The DWCPF (small caps / S-fund) pulled back as it tested both the top and bottom of that flag-like formation, and the sideways consolidation resumes. The 20-day EMA held again, and that is key because below that there is a lot of open air with little support.
The Dow Transportation Index gave back most of the gains from last Thursday and Friday and remains in what could turn out to be a bull flag (red). We've seen a few lower lows being made so we are also watching to see if this is some kind of intermediate-term rounded top (blue) being formed.
The EAFE (I-fund) was up nicely, 0.49%, and once again it had a lot to do with the dollar losing 0.49% on the day.
The dollar slipped as mentioned and you can see that the 200-day EMA held as resistance and yesterday's dip filled a small open gap (blue). There are a couple more open gaps below in red that could be downside targets, but support is rising and currently sitting near 24.30, so the upside trend is still intact for now.
The AGG (Bonds / F-fund) rallied nicely, filled two open gaps, which we talked about yesterday, but the trend is down and it would not be a surprise to see the descending resistance hold it back before the week is up. The Fed's FOMC meeting could have bond traders / investors nervous since the economic data has been stronger than expected lately, and that could mean high rates (lower bond prices).
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
Thanks for reading. We'll see you back here tomorrow.
Tom Crowley
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.
