08/18/25
The Dow closed higher on Friday thanks to a 12% gain in Unitedheath (UNH), otherwise US stocks were moderately lower, while a decline in the dollar helped the I-fund to a solid gain on the day. All the TSP stock funds were positive for the week, and they are also positive for the month, despite the bearish reputation that August has. Bonds and the F-fund slipped on Friday with yields moving up.
(The most current commentary is always posted here: www.tsptalk.com/comments.php)
For the last few weeks I have been stressing the bearish seasonality that August (and September) typically have. So far we haven't seen much evidence of that weighing on the stock market, although if you recall, the first trading day in August saw the S&P 500 down 1.60% and the S-fund down 2.05%, but the indices have been grinding higher ever since. however, we're not out of the woods yet.
Seasonality is not typically a primary indicator for me, except surrounding some major US holidays, but during post-election years, which we are in now, there is an additional thrust of negative seasonality that starts about his time of year, and lasts into October.
The seasonality chart of the VIX (Volatility Index) also shows that volatility does tend to pick up near the end of July and also heads right into the middle of October. Volatility is usually associated with negative market action as it is more of an indication of fear in the market rather than actually market swings, and fear usually rises when stocks are falling.
Source: https://charts.equityclock.com/volatility-index-vix-seasonal-chart
The current VIX is sitting right near 15, which is near the lows of the year and showing signs of possible complacency, and this one year chart shows where we are now, and what happened a year ago when the VIX was also near 15 but shot up to 23 by early September. And last year there were three pushed near 23 between September and early November.
After Friday's loss the S&P 500 (C-fund) closed off the all time highs, remains in a very tight trading channel since the August 1st low. It is holding above the July peak which is trying to hold as support, but nearly created another one of those negative outside reversal days, although came just short of doing so.
I highlighted the PMO [momentum] indicator above as it looks like it may be trying to rollover again after retesting its red moving average. It had crossed below its average in mid-July, made a failed attempt to get back above it in late July just before that negative reversal days and sharp pullback, so this may be a key pivot point as momentum may be showing signs of waning, although a couple of good days could reverse that and push the indicator back above its average.
Momentum currently seems to be on the bulls' side however any negative action early this week would not only push that PMO momentum indicator down again, but the Relative Strength Indicator would likely cement in a lower high while the S&P 500 is making a higher high, creating another negative divergence, which often, not always, leads to a meaningful pullback or correction. The blue lines were one of those times where the negative divergence did not portent any serious market pullback. However, the one in February sure did.
It's a fairly quiet week as far as economic data goes, although the 2025 Jackson Hole Economic Policy Symposium will be held later this week from Aug. 21-23. This year’s theme is “Labor Markets in Transition: Demographics, Productivity, and Macroeconomic Policy."
We will also get the Fed meeting minutes on Thursday, so we may get more of an insight into what the Fed is thinking about interest rates.
The DWCPF / S-fund was down for a second straight day after the big 2-day rally. 2375 looks like important support so it may not be able to withstand too much downside early this week without breaking that support.
ACWX (I-fund) took another weak dollar advantage to outperform the US fund and make another new high for the year.
I don't know why the dollar would rally from here, but that inverted head and shoulders pattern with a retest of the open gaps, makes it look like it could be trying to form a longer term low.
BND (bonds / F-fund) continues to hold onto that April peak as support despite the recent choppy action. There is more support below that blue line, plus the open gap, so it could remain choppy.
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 may use additional methods and strategies to determine fund positions.
The Dow closed higher on Friday thanks to a 12% gain in Unitedheath (UNH), otherwise US stocks were moderately lower, while a decline in the dollar helped the I-fund to a solid gain on the day. All the TSP stock funds were positive for the week, and they are also positive for the month, despite the bearish reputation that August has. Bonds and the F-fund slipped on Friday with yields moving up.
(The most current commentary is always posted here: www.tsptalk.com/comments.php)
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For the last few weeks I have been stressing the bearish seasonality that August (and September) typically have. So far we haven't seen much evidence of that weighing on the stock market, although if you recall, the first trading day in August saw the S&P 500 down 1.60% and the S-fund down 2.05%, but the indices have been grinding higher ever since. however, we're not out of the woods yet.
Seasonality is not typically a primary indicator for me, except surrounding some major US holidays, but during post-election years, which we are in now, there is an additional thrust of negative seasonality that starts about his time of year, and lasts into October.
The seasonality chart of the VIX (Volatility Index) also shows that volatility does tend to pick up near the end of July and also heads right into the middle of October. Volatility is usually associated with negative market action as it is more of an indication of fear in the market rather than actually market swings, and fear usually rises when stocks are falling.
Source: https://charts.equityclock.com/volatility-index-vix-seasonal-chart
The current VIX is sitting right near 15, which is near the lows of the year and showing signs of possible complacency, and this one year chart shows where we are now, and what happened a year ago when the VIX was also near 15 but shot up to 23 by early September. And last year there were three pushed near 23 between September and early November.
After Friday's loss the S&P 500 (C-fund) closed off the all time highs, remains in a very tight trading channel since the August 1st low. It is holding above the July peak which is trying to hold as support, but nearly created another one of those negative outside reversal days, although came just short of doing so.
I highlighted the PMO [momentum] indicator above as it looks like it may be trying to rollover again after retesting its red moving average. It had crossed below its average in mid-July, made a failed attempt to get back above it in late July just before that negative reversal days and sharp pullback, so this may be a key pivot point as momentum may be showing signs of waning, although a couple of good days could reverse that and push the indicator back above its average.
Momentum currently seems to be on the bulls' side however any negative action early this week would not only push that PMO momentum indicator down again, but the Relative Strength Indicator would likely cement in a lower high while the S&P 500 is making a higher high, creating another negative divergence, which often, not always, leads to a meaningful pullback or correction. The blue lines were one of those times where the negative divergence did not portent any serious market pullback. However, the one in February sure did.
It's a fairly quiet week as far as economic data goes, although the 2025 Jackson Hole Economic Policy Symposium will be held later this week from Aug. 21-23. This year’s theme is “Labor Markets in Transition: Demographics, Productivity, and Macroeconomic Policy."
We will also get the Fed meeting minutes on Thursday, so we may get more of an insight into what the Fed is thinking about interest rates.
The DWCPF / S-fund was down for a second straight day after the big 2-day rally. 2375 looks like important support so it may not be able to withstand too much downside early this week without breaking that support.
ACWX (I-fund) took another weak dollar advantage to outperform the US fund and make another new high for the year.
I don't know why the dollar would rally from here, but that inverted head and shoulders pattern with a retest of the open gaps, makes it look like it could be trying to form a longer term low.
BND (bonds / F-fund) continues to hold onto that April peak as support despite the recent choppy action. There is more support below that blue line, plus the open gap, so it could remain choppy.
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 may use additional methods and strategies to determine fund positions.
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