Stocks were up early yesterday and drifted even higher in early afternoon trading, but we had some fireworks after the FOMC rate hike and policy statement were announced. Initially stocks went even higher after the rate hike. The S&P filled an overhead gap and the Dow was up over 110-points at the highs, but then it all came tumbling down. Depending on the index the losses weren't too bad, but the decline from top to bottom yesterday was fairly dramatic.
[TABLE="align: center"]
[TR]
[TD="align: center"][SUB] Daily TSP Funds Return
[/SUB][TABLE="align: center"]
[TR]
[TD="align: right"]
[/TR]
[/TABLE]
[/TD]
[TD]
[/TD]
[TD="align: center"]
[/TR]
[/TABLE]
[SUB]The small caps lagged again and the financials had a particularly bad day, but even on a day like yesterday we saw diversity with decent gains in some indices, the Transports and the I-fund, while most were down sharply.
The Fed said they see three potential rate hikes for 2019, and of course one in December of this year. It hasn't been a stock market killer yet, but perhaps the drip, drip, drip of these increases may have investors moving into bonds for a little while?
Yes, bonds have been falling and look bad, but that doesn't mean we won't see an relief occasional rally. When the Fed raised rates in June we saw a similar reaction in that yields on the 10-year Treasury, which were rallying into the FOMC meeting, peaked and rolled over after the meeting. Remember, bond prices go up when yields are falling.
[/SUB]
[SUB]
The S&P 500 / C-fund was up for most of the day and filled an open gap after the FOMC meeting, but once it was filled everything reversed down and we ended with a nasty negative outside reversal day. The good news for the bulls is that so far it is still holding above that rising support line. With the close below last the August high, this could be a failed breakout if the S&P doesn't snap right back up.
The small caps (S-fund) were down sharply losing another 0.80% yesterday but here it is testing support that has been holding repeatedly. Can it do it again?
The Nasdaq was flying high early but it lost steam after it hit the top of what still could be a bear flag.
The EAFE Index was up but the overseas markets had not yet reacted to the U.S. sell-off after the Fed meeting. The price of the I-fund may be skewed Wednesday and need adjusting on Thursday.
The dollar was down but closed higher as it tests the resistance from the bottom of the head and shoulders pattern again.
The AGG (bonds) was up as we saw a buy the news reaction after investors have been selling the rumor of a rate hike for weeks. According to sentimenTrader.com, "... the TLT bond fund (20+ year bond fund) rallied 0.7% on FOMC day. That has led to further gains 61% of the time (out of 28 trades) during the next week. But a little under a month later, TLT held its gains only 29% of the time, averaging an overall return of -1.2%." As I mentioned yesterday, trades in bonds may need to be quick. It may be too dangerous.
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
[/SUB]
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.
[TABLE="align: center"]
[TR]
[TD="align: center"][SUB] Daily TSP Funds Return
[TR]
[TD="align: right"]
[SUB] More returns [/SUB]
[/TD][/TR]
[/TABLE]
[/TD]
[TD]
[/TD]
[TD="align: center"]
[SUB]
[/SUB]
[/TD]
[/TR]
[/TABLE]
[SUB]The small caps lagged again and the financials had a particularly bad day, but even on a day like yesterday we saw diversity with decent gains in some indices, the Transports and the I-fund, while most were down sharply.
The Fed said they see three potential rate hikes for 2019, and of course one in December of this year. It hasn't been a stock market killer yet, but perhaps the drip, drip, drip of these increases may have investors moving into bonds for a little while?
Yes, bonds have been falling and look bad, but that doesn't mean we won't see an relief occasional rally. When the Fed raised rates in June we saw a similar reaction in that yields on the 10-year Treasury, which were rallying into the FOMC meeting, peaked and rolled over after the meeting. Remember, bond prices go up when yields are falling.
[/SUB]
[SUB]
The S&P 500 / C-fund was up for most of the day and filled an open gap after the FOMC meeting, but once it was filled everything reversed down and we ended with a nasty negative outside reversal day. The good news for the bulls is that so far it is still holding above that rising support line. With the close below last the August high, this could be a failed breakout if the S&P doesn't snap right back up.
The small caps (S-fund) were down sharply losing another 0.80% yesterday but here it is testing support that has been holding repeatedly. Can it do it again?
The Nasdaq was flying high early but it lost steam after it hit the top of what still could be a bear flag.
The EAFE Index was up but the overseas markets had not yet reacted to the U.S. sell-off after the Fed meeting. The price of the I-fund may be skewed Wednesday and need adjusting on Thursday.
The dollar was down but closed higher as it tests the resistance from the bottom of the head and shoulders pattern again.
The AGG (bonds) was up as we saw a buy the news reaction after investors have been selling the rumor of a rate hike for weeks. According to sentimenTrader.com, "... the TLT bond fund (20+ year bond fund) rallied 0.7% on FOMC day. That has led to further gains 61% of the time (out of 28 trades) during the next week. But a little under a month later, TLT held its gains only 29% of the time, averaging an overall return of -1.2%." As I mentioned yesterday, trades in bonds may need to be quick. It may be too dangerous.
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
[/SUB]
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.
