The futures were up strongly coming into Wednesday's trading, and then pushed even higher after a favorable CPI report was released before the opening bell, but as soon as that bell rang, the sell the rips crowd came in and took away all of the 1% opening gain in the S&P 500 before the end of the morning. The open was also the high of the day, so while we finally saw some green in the indices at the close, it wasn't very impressive.
The Fed went from cutting rates repeatedly into January to a more hawkish data dependent approach. Back then the dollar was red hot, and oil was near $80 a barrel.
Those high levels added to the market's concerns and weighed on the stock market. The S&P 500 actually peaked in December before we got a double top retest in February where things started to go south again, and that coincided with escalating talks about tariffs.
But since January, yields have come down sharply, the price of oil has come down sharply, the dollar has come down meaningfully, and of course stocks came down.
With these at much lower levels, the set up looks better and the recent correction may have priced in the new situation. Is that enough? Many of the tariffs haven't even been implemented yet, but the bond market is telling us that it is not concerned about those causing inflation, although they could still be pricing in economic slowdown as yields fall. That remains to be seen, and we won't know for months if it actually causes a recession.
The S&P 500 (C-fund) is still trading below the 200-day EMA and below a plethora of broken support, so that's not a good look. If this can somehow bounce back above 5700 we could really see an upside move, but until then the bears will most likely keep pushing the sell button on rallies up to that area until it stops working.
Trading volume was very light during yesterday's lackluster attempt at a rally.
It's not easy to find an indicator that is not oversold, or at an extreme so the chances of a rebound are increasing. Momentum could take stocks lower but the risk / reward for a meaningful rebound is much better. How many investors watched a stock like Nvidia go through the roof and pray for a decline to buy it lower? Now its down 25% from its highs, but it's never easy buying a falling knife.
DWCPF (S-fund) is looking similar the S&P 500 chart above, although technically a little more broken because of the concern about the economic growth which impacts the smaller companies more.
ACWX (the I-fund tracking index) led on the upside again and other than a double top just above 57, this chart has held up amazingly well considering what is happening to the US charts. The question is whether to buy the beaten down funds, or the one outpacing the others this year?
BND (F-fund) pulled back again, and once again the bond market does the opposite of what I might have expected after a cooled down inflation report. I would have expected yields to move lower and BND to go higher, but it had run up for two months so I'll give it the benefit of the doubt. It's right, and I'm wrong.
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.
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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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The CPI (Consumer Price Index CPI) report came in showing a year-over-year total CPI up 2.8%, versus 3.0% in January, and core CPI up 3.1%, versus 3.2% in January, so there was some relief in that area, and it bodes well for the FOMC meeting next week. If the Fed gets less hawkish because of this data, it may finally ignite the inevitable relief rally that is due. The Fed went from cutting rates repeatedly into January to a more hawkish data dependent approach. Back then the dollar was red hot, and oil was near $80 a barrel.
Those high levels added to the market's concerns and weighed on the stock market. The S&P 500 actually peaked in December before we got a double top retest in February where things started to go south again, and that coincided with escalating talks about tariffs.
But since January, yields have come down sharply, the price of oil has come down sharply, the dollar has come down meaningfully, and of course stocks came down.
With these at much lower levels, the set up looks better and the recent correction may have priced in the new situation. Is that enough? Many of the tariffs haven't even been implemented yet, but the bond market is telling us that it is not concerned about those causing inflation, although they could still be pricing in economic slowdown as yields fall. That remains to be seen, and we won't know for months if it actually causes a recession.
The S&P 500 (C-fund) is still trading below the 200-day EMA and below a plethora of broken support, so that's not a good look. If this can somehow bounce back above 5700 we could really see an upside move, but until then the bears will most likely keep pushing the sell button on rallies up to that area until it stops working.
Trading volume was very light during yesterday's lackluster attempt at a rally.
It's not easy to find an indicator that is not oversold, or at an extreme so the chances of a rebound are increasing. Momentum could take stocks lower but the risk / reward for a meaningful rebound is much better. How many investors watched a stock like Nvidia go through the roof and pray for a decline to buy it lower? Now its down 25% from its highs, but it's never easy buying a falling knife.
DWCPF (S-fund) is looking similar the S&P 500 chart above, although technically a little more broken because of the concern about the economic growth which impacts the smaller companies more.
ACWX (the I-fund tracking index) led on the upside again and other than a double top just above 57, this chart has held up amazingly well considering what is happening to the US charts. The question is whether to buy the beaten down funds, or the one outpacing the others this year?
BND (F-fund) pulled back again, and once again the bond market does the opposite of what I might have expected after a cooled down inflation report. I would have expected yields to move lower and BND to go higher, but it had run up for two months so I'll give it the benefit of the doubt. It's right, and I'm wrong.
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.
