Stocks fell sharply yesterday as the Dow lost 130-points, or 0.81%, while the broader indices were hit much harder. Most of the indices have now reversed the large gains created after last Friday's jobs report. Bonds also lost ground on the day as yields moved higher.
[TABLE="width: 80%, align: center"]
[TR]
[TD="width: 300"]
[/TD]
[TD="align: center"] Daily TSP Funds Return[TABLE="width: 163"]
[TR]
[TD="width: 83, align: right"] G-Fund:[/TD]
[TD="width: 80, align: right"] +0.0063%[/TD]
[/TR]
[TR]
[TD="width: 83, align: right"] F-fund:[/TD]
[TD="width: 80, align: right"] -0.21%[/TD]
[/TR]
[TR]
[TD="width: 83, align: right"] C-fund:[/TD]
[TD="width: 80, align: right"] -1.12%[/TD]
[/TR]
[TR]
[TD="width: 83, align: right"] S-fund:[/TD]
[TD="width: 80, align: right"] -1.59%[/TD]
[/TR]
[TR]
[TD="width: 83, align: right"] I-fund:[/TD]
[TD="width: 80, align: right"] -0.45%[/TD]
[/TR]
[/TABLE]
[TABLE="width: 69%, align: center"]
[TR]
[TD="align: right"] [/TD]
[/TR]
[/TABLE]
[/TD]
[/TR]
[/TABLE]
The S&P 500 (SPY) filled its small open gap yesterday and is back testing its short-term rising support line.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The word is that QE taper talk and rising bond yields are spooking the markets and there may be some truth to that, but when I look at this chart of the Russell 2000 small caps, the recent trading pattern is almost identical to the pullback we saw in late October and into November. Back then there was a sharp down day, like yesterday, that hit the 50-day EMA, like yesterday, followed by a big up day that started another leg higher. But...
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
... the difference may be that the rally off of that 50-day EMA back in November started with the October jobs report that was released on November 8. We may need to see a catalyst today to have a similar response and I don't think there is anything on the schedule that could have that kind of an effect.
We could see a short-term oversold rally, particularly as we head into the strongest part of the year historically, but today is trading day #9 in December and the strong seasonality doesn't really kick in until trading day #12 or maybe #15 as day 13 and 14 are actually down more often than up despite the average return being slightly positive.
Chart provided courtesy of www.sentimentrader.com, analysis by TSP
After filling some open gaps this week, these bond ETF's started to head down again on Wednesday. The IEF 7 to 10 year ETF is particularly of interest to me as it backed off after filling the open gap, but it is now resting on top of the neckline of its bearish head and shoulders pattern.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Many are saying that the stock market is reacting to rising bond yields and the closer the 10-year yield gets to 3%, the more nervous investors are getting. The recent rising trends in the 10 and 30-year yields are intact.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The FOMC meeting is next week and the taper / no taper talk will continue until then. The question is, how will the market react to a taper - or a no taper announcement? Of course any tapering would be just that - a taper, and not a significant decrease in the bond buying program. But will investors rush to the stock market exits to be out before the taper is played out over the next months or years? Most pundits are saying that won't happen, but that is because most of them are fully invested and don't want that to happen.
We know the market tends to front run the news so if stocks do experience some kind of a correction, it is more likely that the correction will bottom once the tapering is completed since no one is going to wait until the QE is ended before selling.
In today's TSP Talk Plus Report we look at a longer-term view of the S&P 500 and the major trends / formations we are seeing on them. Plus we take a look at the short and intermediate-term indicators. 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
Posted daily at TSP Talk Market Commentary
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="width: 80%, align: center"]
[TR]
[TD="width: 300"]
[TD="align: center"] Daily TSP Funds Return[TABLE="width: 163"]
[TR]
[TD="width: 83, align: right"] G-Fund:[/TD]
[TD="width: 80, align: right"] +0.0063%[/TD]
[/TR]
[TR]
[TD="width: 83, align: right"] F-fund:[/TD]
[TD="width: 80, align: right"] -0.21%[/TD]
[/TR]
[TR]
[TD="width: 83, align: right"] C-fund:[/TD]
[TD="width: 80, align: right"] -1.12%[/TD]
[/TR]
[TR]
[TD="width: 83, align: right"] S-fund:[/TD]
[TD="width: 80, align: right"] -1.59%[/TD]
[/TR]
[TR]
[TD="width: 83, align: right"] I-fund:[/TD]
[TD="width: 80, align: right"] -0.45%[/TD]
[/TR]
[/TABLE]
[TABLE="width: 69%, align: center"]
[TR]
[TD="align: right"] [/TD]
[/TR]
[/TABLE]
[/TD]
[/TR]
[/TABLE]
The S&P 500 (SPY) filled its small open gap yesterday and is back testing its short-term rising support line.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The word is that QE taper talk and rising bond yields are spooking the markets and there may be some truth to that, but when I look at this chart of the Russell 2000 small caps, the recent trading pattern is almost identical to the pullback we saw in late October and into November. Back then there was a sharp down day, like yesterday, that hit the 50-day EMA, like yesterday, followed by a big up day that started another leg higher. But...
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
... the difference may be that the rally off of that 50-day EMA back in November started with the October jobs report that was released on November 8. We may need to see a catalyst today to have a similar response and I don't think there is anything on the schedule that could have that kind of an effect.
We could see a short-term oversold rally, particularly as we head into the strongest part of the year historically, but today is trading day #9 in December and the strong seasonality doesn't really kick in until trading day #12 or maybe #15 as day 13 and 14 are actually down more often than up despite the average return being slightly positive.
Chart provided courtesy of www.sentimentrader.com, analysis by TSP
After filling some open gaps this week, these bond ETF's started to head down again on Wednesday. The IEF 7 to 10 year ETF is particularly of interest to me as it backed off after filling the open gap, but it is now resting on top of the neckline of its bearish head and shoulders pattern.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Many are saying that the stock market is reacting to rising bond yields and the closer the 10-year yield gets to 3%, the more nervous investors are getting. The recent rising trends in the 10 and 30-year yields are intact.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The FOMC meeting is next week and the taper / no taper talk will continue until then. The question is, how will the market react to a taper - or a no taper announcement? Of course any tapering would be just that - a taper, and not a significant decrease in the bond buying program. But will investors rush to the stock market exits to be out before the taper is played out over the next months or years? Most pundits are saying that won't happen, but that is because most of them are fully invested and don't want that to happen.
We know the market tends to front run the news so if stocks do experience some kind of a correction, it is more likely that the correction will bottom once the tapering is completed since no one is going to wait until the QE is ended before selling.
In today's TSP Talk Plus Report we look at a longer-term view of the S&P 500 and the major trends / formations we are seeing on them. Plus we take a look at the short and intermediate-term indicators. 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
Posted daily at TSP Talk Market Commentary
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.
