The wild swings in stock prices continued with a strong rally on Friday as the market tries to hold the recent lows and get the bear market behind it. The action has been headline driven and over the weekend we may have had another market moving headline as Trump made some exemptions to the certain tech products, including smart phones, computers and semiconductors, which should be good news to the Apple and Nvidia's of the world.
First, here's the CPI data as it continues to fall lower and get closer to the Fed's inflation target near 2%. Typically this would send bond yields lower and bond process higher, but that didn't happen.
Instead the 10-year Treasury Yield spiked higher last week as China and Japan were selling US bonds for various reasons, whether being retaliatory in the case of China, and concerns over trade in the case of Japan. What happens next could be telling because this chart of the 10-year is a classic head and shoulders pattern with a test of the head on Friday.
These typically lead to more downside, so we'll see if China and Japan will keep up the selling.
The target for the Fed Funds Rate has actually moved to a more hawkish outlook. Yes, the Fed is almost certainly going to be cutting interest rates this year as we look at the September meeting speculation numbers. You can see that some of the larger cuts expected a week ago are now reduced. The chances of four 0.25% rate cuts went from 21% to 4% over the last week, while the chances of only one 0.25% cut increased from 3% to 20%.
So with inflation coming down, some concerns about economic growth, and the ongoing uncertainty about the tariffs effect of the economy, the number of interest rate cuts are still up in the air, which mean economic data headlines may continue to be market movers. We'll get the Retail Sales data on Wednesday, otherwise it's just the normal weekly data.
The S&P 500 (C-fund) has traded in an amazing 700 point range over the last 7 trading days. The futures were up on Sunday as I read this and there will likely be a bullish reaction to the tariff exemptions announced over the weekend. Any positive move will push it above one level of resistance but once it gets above 5500, the resistance starts to get heavier and the challenges get tougher.
You can see the difference between the bear flag low in Mid-March and the "V" bottom look of the April low. That doesn't mean a retest of that low won't occur, but the chances are probably lower now compared to the chances we had in March.
With the tariff exemption in tech coming, the Nasdaq 100 may get a lot of attention. It too shows the "V" bottom versus the March bear flag. However, anytime a chart is trading below the major moving averages, there is potential trouble once it moves back up to those averages. Still, that means a move to 19,000 or 20,000 is possible, even if this is going to continue in a down trend. In other words, we could remain in a bearish trending market but still have a good opportunity to make money on the upside in the short-term.
Earnings season means revenue earnings and revenue guidance could set the tone for the stock market - outside of the ever changing tariff headlines.
DWCPF (S-fund) needs a gap up open to push it above that resistance in the 1900 area. From there 2000, 2040, 2050, and 2100 would be the next area to test. Again, this is below all of the major moving average so the bears still have some control outside of some short-term upside potential.
ACWX was up 2.6% on Friday and the I-fund was given a gain of 1.9%. That may be making up for Thursday's 0.01% loss in the I-fund when ACWX was down 1.59%. The dollar fell sharply over the last two trading days helping the I-fund to a nice come back after lagging earlier in the week.
BND (F-fund) was down on Friday as yields rallied last week. The lows last week helped fill in one of the small open gaps from February, but there's a larger open gap down near 70.50 from January if bonds continue to struggle. Otherwise that 200-day average is trying to hold as support.
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
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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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Last week we got some favorable inflation data in the CPI and PPI reports, but the stock and bond markets are still more focused on the tariff situation. The stock market rebounded nicely for the week, but despite the good news on the inflation front, the bond market was rocked.First, here's the CPI data as it continues to fall lower and get closer to the Fed's inflation target near 2%. Typically this would send bond yields lower and bond process higher, but that didn't happen.
Instead the 10-year Treasury Yield spiked higher last week as China and Japan were selling US bonds for various reasons, whether being retaliatory in the case of China, and concerns over trade in the case of Japan. What happens next could be telling because this chart of the 10-year is a classic head and shoulders pattern with a test of the head on Friday.
These typically lead to more downside, so we'll see if China and Japan will keep up the selling.
The target for the Fed Funds Rate has actually moved to a more hawkish outlook. Yes, the Fed is almost certainly going to be cutting interest rates this year as we look at the September meeting speculation numbers. You can see that some of the larger cuts expected a week ago are now reduced. The chances of four 0.25% rate cuts went from 21% to 4% over the last week, while the chances of only one 0.25% cut increased from 3% to 20%.
So with inflation coming down, some concerns about economic growth, and the ongoing uncertainty about the tariffs effect of the economy, the number of interest rate cuts are still up in the air, which mean economic data headlines may continue to be market movers. We'll get the Retail Sales data on Wednesday, otherwise it's just the normal weekly data.
The S&P 500 (C-fund) has traded in an amazing 700 point range over the last 7 trading days. The futures were up on Sunday as I read this and there will likely be a bullish reaction to the tariff exemptions announced over the weekend. Any positive move will push it above one level of resistance but once it gets above 5500, the resistance starts to get heavier and the challenges get tougher.
You can see the difference between the bear flag low in Mid-March and the "V" bottom look of the April low. That doesn't mean a retest of that low won't occur, but the chances are probably lower now compared to the chances we had in March.
With the tariff exemption in tech coming, the Nasdaq 100 may get a lot of attention. It too shows the "V" bottom versus the March bear flag. However, anytime a chart is trading below the major moving averages, there is potential trouble once it moves back up to those averages. Still, that means a move to 19,000 or 20,000 is possible, even if this is going to continue in a down trend. In other words, we could remain in a bearish trending market but still have a good opportunity to make money on the upside in the short-term.
Earnings season means revenue earnings and revenue guidance could set the tone for the stock market - outside of the ever changing tariff headlines.
DWCPF (S-fund) needs a gap up open to push it above that resistance in the 1900 area. From there 2000, 2040, 2050, and 2100 would be the next area to test. Again, this is below all of the major moving average so the bears still have some control outside of some short-term upside potential.
ACWX was up 2.6% on Friday and the I-fund was given a gain of 1.9%. That may be making up for Thursday's 0.01% loss in the I-fund when ACWX was down 1.59%. The dollar fell sharply over the last two trading days helping the I-fund to a nice come back after lagging earlier in the week.
BND (F-fund) was down on Friday as yields rallied last week. The lows last week helped fill in one of the small open gaps from February, but there's a larger open gap down near 70.50 from January if bonds continue to struggle. Otherwise that 200-day average is trying to hold as support.
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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