Another rally failed on Thursday and it has now been nearly a month since the last time the S&P 500 closed positive for two consecutive days. It has also finally closed 10% below its February peak so that makes it an official "correction." Is that the bell that investors were waiting for before buying back in? Inflation data came in cool for a second straight day and yields were down, giving the F-fund a boost, but the TSP stock funds were all down again.
While the recent concerns over the economy are well reported, many analysts still do not see a recession in the future - not that anyone is great at predicting this - but without a recession, a 10% correction can often be the signal that the decline has come far enough. It may not stop on a dime, and perhaps we are not at the lows, but that 10% mark would be a convenient area for some relief.
Even during 2022 where it was an official bear market, look at the size of the rallies - two were 600 points on the S&P 500 (or about 6000 Dow points) all of which needed to be sold that year.
So I'm not smart enough to know if this market is at a bottom now, but I do know oversold markets when I see them. We haven't had a panicky, high volume, capitulation action yet, so maybe we will see lower lows down the road, but "V" bottom of lower lows, either often bring powerful rebounds. I will deal with what to do once we get one when we get there.
The current S&P 500 (C-fund) chart shows we made a new closing low for the year, and as I said, it's now 10% below that February peak.
I highlighted the the 200-day EMA turning down, which is concerning. This has been a quick and painful decline, and normally something like that is done because of a shock to the system that has to get priced in. Right now I think it is corporate uncertainty due to the new economic policies that is causing this decline so perhaps it is less predictable.
"V" bottoms tend to also come as a reset to monetary policy or an economic change. For example, the COVID crash "V" bottom was triggered by the Fed opening up the spigots with cheap, easy money flooding the monetary system. This week's cool inflation data was a positive but apparently not market turning, but perhaps next week's Fed meeting will be?
The Dow Transportation Index has led on the way down, as is often the case, and it is now below the large head and shoulders target. This is very oversold, and unless it is forecasting some looming disaster (and I don't mean tariffs) that we don't know about yet, this is overdue for a rebound higher, possibly as high as 15,750.
It may take a change from the Fed, or some kind of resolution or solution in Washington on tariffs. We know we're still at risk of a government shut down because, I know it's difficult to believe, but the two sides in DC don't agree on spending. However, history suggests it doesn't have much of an impact on the stock market. I posted this chart the other day...
DWCPF (S-fund) has also been in free fall since it's high in January, but it's actual peak was back in November, so this struggle has been going on for some time despite repeated calls for a rotation into broader, smaller indices. On a technical note, this has cut below the 200-day EMA like a hot knife through butter, and the average is now moving down - not good. But the other shorter term averages are still in good order, that is the short-term averages are above the longer averages. Crossovers are concerning, but we haven't seen one yet here. That is a symptom of a market that may have come down too far, too fast.
ACWX (the I-fund tracking index) continues to outperform the US funds as the losses have been more muted and unlike the US fund charts, this one is still above its 50-day EMA. However we do have a clear double top. It's a matter of whether that support near 55 can continue to hold.
BND (F-fund) pulled back early for some reason, despite the cool PPI report. It did reverse higher however after nearly filling in that open gap. That looks like a good sign for bonds as BND closes back above the those late 2024 peaks.
Thanks so much for reading! Have a great weekend!
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 may use additional methods and strategies to determine fund positions.
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While the recent concerns over the economy are well reported, many analysts still do not see a recession in the future - not that anyone is great at predicting this - but without a recession, a 10% correction can often be the signal that the decline has come far enough. It may not stop on a dime, and perhaps we are not at the lows, but that 10% mark would be a convenient area for some relief.
Even during 2022 where it was an official bear market, look at the size of the rallies - two were 600 points on the S&P 500 (or about 6000 Dow points) all of which needed to be sold that year.
So I'm not smart enough to know if this market is at a bottom now, but I do know oversold markets when I see them. We haven't had a panicky, high volume, capitulation action yet, so maybe we will see lower lows down the road, but "V" bottom of lower lows, either often bring powerful rebounds. I will deal with what to do once we get one when we get there.
The current S&P 500 (C-fund) chart shows we made a new closing low for the year, and as I said, it's now 10% below that February peak.
I highlighted the the 200-day EMA turning down, which is concerning. This has been a quick and painful decline, and normally something like that is done because of a shock to the system that has to get priced in. Right now I think it is corporate uncertainty due to the new economic policies that is causing this decline so perhaps it is less predictable.
"V" bottoms tend to also come as a reset to monetary policy or an economic change. For example, the COVID crash "V" bottom was triggered by the Fed opening up the spigots with cheap, easy money flooding the monetary system. This week's cool inflation data was a positive but apparently not market turning, but perhaps next week's Fed meeting will be?
The Dow Transportation Index has led on the way down, as is often the case, and it is now below the large head and shoulders target. This is very oversold, and unless it is forecasting some looming disaster (and I don't mean tariffs) that we don't know about yet, this is overdue for a rebound higher, possibly as high as 15,750.
It may take a change from the Fed, or some kind of resolution or solution in Washington on tariffs. We know we're still at risk of a government shut down because, I know it's difficult to believe, but the two sides in DC don't agree on spending. However, history suggests it doesn't have much of an impact on the stock market. I posted this chart the other day...
DWCPF (S-fund) has also been in free fall since it's high in January, but it's actual peak was back in November, so this struggle has been going on for some time despite repeated calls for a rotation into broader, smaller indices. On a technical note, this has cut below the 200-day EMA like a hot knife through butter, and the average is now moving down - not good. But the other shorter term averages are still in good order, that is the short-term averages are above the longer averages. Crossovers are concerning, but we haven't seen one yet here. That is a symptom of a market that may have come down too far, too fast.
ACWX (the I-fund tracking index) continues to outperform the US funds as the losses have been more muted and unlike the US fund charts, this one is still above its 50-day EMA. However we do have a clear double top. It's a matter of whether that support near 55 can continue to hold.
BND (F-fund) pulled back early for some reason, despite the cool PPI report. It did reverse higher however after nearly filling in that open gap. That looks like a good sign for bonds as BND closes back above the those late 2024 peaks.
Thanks so much for reading! Have a great weekend!
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.
