09/12/25
Stocks continue their relentless run higher, and on Thursday almost all indices were participating despite a mix of good and bad news. The S&P and Nasdaq have been up everyday this week, and investors seem to looking for any reason to buy as we head into next week's almost certain interest rate cut. The CPI data came in hot suggesting a tick up in inflation, but jobless claims were also high suggesting potential economic weakness.
There is certainly a set up for some kind of sell the news reaction next week, but the interest rate could be the first of a series of several, so any selling may continue to get bought up quickly keeping pullbacks shallow. The market will let us know when that changes, but in the meantime it will also frustrate as many traders and investors as possible; currently that is the bears, who believe stocks are going down, and underinvested bulls trying to buy a pullback.
The Consumer Price Index was a little higher than expected. Here are some highlights from briefing.com:
"Total CPI was up 0.4% month-over-month in August (Briefing.com consensus 0.3%) following a 0.3% increase in July.
"Core CPI, which excludes food and energy, was up 0.3%, as expected, following a 0.3% increase in July.
"On a year-over-year basis, total CPI was up 2.9%, versus 2.7% in July, while core CPI was up 3.1%, unchanged versus July and still well above the Fed's 2.0% inflation target (specifically for PCE inflation)."
We want to see this below 3, and hopefully closer to 2. This number puts the Fed in a tough situation and that makes yesterday's rally somewhat curious. One thought is that September 11th has become a day that the stock market has done well, and it has been up 63% of the time with an average gain of 0.25% over the last 30 years. The days following aren't quite as good.
Jobless claims came in higher than expected and that weak labor market data may be why the Fed will be cutting rates, and it sent yields lower yesterday. But that higher inflation makes it a little surprising that the market is so convinced that multiple cuts are coming.
The 10-year yield briefly fell below 4% for the first time since April and the bond market has been calling this right for a while, meaning arguing for a rate cut. We probably don't want to see yields fall too quickly as it indicate that the savvy bond market is seeing too much weakness in the economy. Instead we want to see yields holding steady in this area, or grind very slowly down with the Fed cuts.
The small caps of the DWCPF* (S-fund) enjoyed those lower yields and had a big day after lagging for a couple of days. This is a 6-day chart.
* There is a bad quote that occurred on DWCPF on September 3rd of 20,000 and it has distorted the chart, so until they fix that, this chart will be a 5-minute chart spanning just a few days.
Meanwhile the S&P 500 / C-fund has been up all week and it continues to make new all time highs. We still have the PMO indicator flashing a warning sign as it has been moving down as the index has moved up, but so far it has not led to any trouble.
The indicator has turned upward this week and is about to cross back above its moving average, barring a major decline today. Sometimes these positive crossovers are a sign of being short-term overbought, but this usually happens when stocks were down and rebounded off the lows. That is certainly not the case this time. Very odd, or interesting action going on here.
Stocks have been fine with an economy that isn't running on all cylinders as long as the monetary policies are staying loose, and getting looser in the case of interest rates, but is it getting ahead of itself? It would take a meaningful decline just to get the S&P 500 to the bottom of its trading channel or the 50-day average so an overbought decline would not be the worst thing that could happen, but will the market give the frustrated underinvested that kind of break?
There is an interesting dichotomy out there, or at least that is what I am reading. That is, both margin levels (investors borrowing money to invest) and money market levels (investor basically in cash) are at extremes. Each tell a completely different story.
Being contrarian readings when at extremes, high levels of margin usually suggests investors are getting too aggressive and too bullish, while large money markets levels suggests investors are still underinvested, or too defensive. Make sense of that!
ACWX (I-fund) is reaching for the sky, and the top of its trading channel. That could be resistance, but the resistance is rising. The dollar has been holding steady and trading in a tight range.
BND (bonds / F-fund) made more new highs as yields continue to slide. The higher than expected jobless claims was a good reason for those yields to fall, but will inflation remain sticky? Bonds and the F-fund move up when yields are falling.
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.
Stocks continue their relentless run higher, and on Thursday almost all indices were participating despite a mix of good and bad news. The S&P and Nasdaq have been up everyday this week, and investors seem to looking for any reason to buy as we head into next week's almost certain interest rate cut. The CPI data came in hot suggesting a tick up in inflation, but jobless claims were also high suggesting potential economic weakness.
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There is certainly a set up for some kind of sell the news reaction next week, but the interest rate could be the first of a series of several, so any selling may continue to get bought up quickly keeping pullbacks shallow. The market will let us know when that changes, but in the meantime it will also frustrate as many traders and investors as possible; currently that is the bears, who believe stocks are going down, and underinvested bulls trying to buy a pullback.
The Consumer Price Index was a little higher than expected. Here are some highlights from briefing.com:
"Total CPI was up 0.4% month-over-month in August (Briefing.com consensus 0.3%) following a 0.3% increase in July.
"Core CPI, which excludes food and energy, was up 0.3%, as expected, following a 0.3% increase in July.
"On a year-over-year basis, total CPI was up 2.9%, versus 2.7% in July, while core CPI was up 3.1%, unchanged versus July and still well above the Fed's 2.0% inflation target (specifically for PCE inflation)."
We want to see this below 3, and hopefully closer to 2. This number puts the Fed in a tough situation and that makes yesterday's rally somewhat curious. One thought is that September 11th has become a day that the stock market has done well, and it has been up 63% of the time with an average gain of 0.25% over the last 30 years. The days following aren't quite as good.
Jobless claims came in higher than expected and that weak labor market data may be why the Fed will be cutting rates, and it sent yields lower yesterday. But that higher inflation makes it a little surprising that the market is so convinced that multiple cuts are coming.
The 10-year yield briefly fell below 4% for the first time since April and the bond market has been calling this right for a while, meaning arguing for a rate cut. We probably don't want to see yields fall too quickly as it indicate that the savvy bond market is seeing too much weakness in the economy. Instead we want to see yields holding steady in this area, or grind very slowly down with the Fed cuts.
The small caps of the DWCPF* (S-fund) enjoyed those lower yields and had a big day after lagging for a couple of days. This is a 6-day chart.
* There is a bad quote that occurred on DWCPF on September 3rd of 20,000 and it has distorted the chart, so until they fix that, this chart will be a 5-minute chart spanning just a few days.
Meanwhile the S&P 500 / C-fund has been up all week and it continues to make new all time highs. We still have the PMO indicator flashing a warning sign as it has been moving down as the index has moved up, but so far it has not led to any trouble.
The indicator has turned upward this week and is about to cross back above its moving average, barring a major decline today. Sometimes these positive crossovers are a sign of being short-term overbought, but this usually happens when stocks were down and rebounded off the lows. That is certainly not the case this time. Very odd, or interesting action going on here.
Stocks have been fine with an economy that isn't running on all cylinders as long as the monetary policies are staying loose, and getting looser in the case of interest rates, but is it getting ahead of itself? It would take a meaningful decline just to get the S&P 500 to the bottom of its trading channel or the 50-day average so an overbought decline would not be the worst thing that could happen, but will the market give the frustrated underinvested that kind of break?
There is an interesting dichotomy out there, or at least that is what I am reading. That is, both margin levels (investors borrowing money to invest) and money market levels (investor basically in cash) are at extremes. Each tell a completely different story.
Being contrarian readings when at extremes, high levels of margin usually suggests investors are getting too aggressive and too bullish, while large money markets levels suggests investors are still underinvested, or too defensive. Make sense of that!
ACWX (I-fund) is reaching for the sky, and the top of its trading channel. That could be resistance, but the resistance is rising. The dollar has been holding steady and trading in a tight range.
BND (bonds / F-fund) made more new highs as yields continue to slide. The higher than expected jobless claims was a good reason for those yields to fall, but will inflation remain sticky? Bonds and the F-fund move up when yields are falling.
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.
