07/30/25
Stocks gapped up higher on Tuesday but in typical Turnaround Tuesday fashion, we saw the indices lose steam and close near the lows of the day, creating a negative outside reversal day on some index charts. Small caps lagged and the I-fund posted a more modest loss despite another rally in the dollar. Bonds rallied as yields fell sharply in front of today's FOMC meeting.
(The most current commentary is always posted here: www.tsptalk.com/comments.php)
Today is day two of the FOMC meeting and we'll get a policy statement and interest rate decision announced at 2 PM ET.
Trump and Powell have butted heads on interest rates, but honestly both have good points.
Trump's view on rates is that we could save billions (100's of billions?) of dollars in interest payments on the national debt with a lower rate.
The Fed is still saying tariffs are an unknown on the economy and inflation so they don't want to act prematurely. They have been predicting a cut at the September meeting for a long time so here's a question that each side might be asking:
If you're going to cut in September anyway, why not just do it now?
On the other side, we've waited all year, why not just wait until September as expected?
I don't have the answer, but in the Fed's defense to keep rates on hold, GDPNow's model estimate for real GDP growth in the second quarter of 2025 has been moved up to 2.9 percent, up from 2.4 percent. Source: https://www.atlantafed.org/cqer/research/gdpnow.aspx
A 2.9% GDP is not an economy that currently needs help.
It may depend on the employment data because the Fed will cut rates if they see signs of the labor market struggling. I don't know what data they have right now, but the weekly numbers come out on Thursday, and the monthly jobs report doesn't come out until Friday.
Estimates are a little lighter than the prior months, so a case can be made to do it now before any damage is done.
Briefing.com estimates:
Nonfarm Payrolls
Forecast: 95K,
Consensus: 102K
Prior: 147K
Unemployment Rate
Forecast: 4.2%
Consensus: 4.2%
Prior: 4.1%
The bond market is signaling a rate cut. The Fed tends to follow the all knowing 2-Year Treasury Yield, which is currently 3.88%. The current Fed Funds Rate is 4.25% to 4.5%. They may be two quarter point cuts behind according to the bond market.
The 10-year Treasury yield fell sharply yesterday and is looking for support near 4.34% at the 200-day average. That average has held several times in recent weeks, but that inverted head and shoulders pattern makes a good argument that this may eventually break higher.
The dollar was up sharply for a 4th straight day. That inverted head and shoulders pattern did break to the upside. Sentiment in the dollar had been very bearish, and it still is, so it could have more bounce left. The question is whether this is an oversold, overly bearish, bounce that is destined to fail?
The S&P 500 (C-fund) was down modesty yesterday and I won't go all loony bearish on you, but it also created a negative outside reversal day - a pattern that can be an ominous sign, but if you're a regular reader here you know that the small caps had a major negative outside reversal day on July 15 and the S-fund is still positive since that close, so it was a false flag as of now.
The MACD indicator (Moving Average Convergence Divergence) has been making lower highs as the S&P 500 has been making higher highs, so that is a negative divergence and a possible warning sign.
The price of oil shot higher again yesterday, and once again it did so while the dollar was rallying, which makes the move that much more impressive. It's an interesting formation - a sort of head and shoulders pattern that would typically break down, but it is not orthodox in that it is slanting upward. I think the 72.50 area is a price to watch.
The longer-term chart shows that it is still in a long descending trend and it confirms some potential resistance near 72.50.
Microsoft and META report earnings after the closing bell today, and Apple and Amazon report after the close tomorrow.
We will get the July jobs report on Friday morning.
The DWCPF / S-fund technically created another negative outside reversal day yesterday, but it wasn't as pronounced as the one created on July 15, which to me was a major red flag, but so far the index / S-fund has held up well. 2350 looks like a key pivot point, and there is an open gap down by 2240, with a couple of other support areas in between. If 2350 breaks, be careful.
ACWX (I-fund) was down just modestly despite the 0.25% gain in the dollar. Perhaps Monday's loss was considered overdone, but when the dollar is rallying, the US TSP funds tend to outperform the I-fund, so we'll have to see how this new trend progresses.
BND (bonds / F-fund) had a big day and it looks like this is on its way to test the top of that red channel again. Of course it is an FOMC meeting day and yields could move dramatically. It all depends on the Fed's new monetary policy.
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.
Stocks gapped up higher on Tuesday but in typical Turnaround Tuesday fashion, we saw the indices lose steam and close near the lows of the day, creating a negative outside reversal day on some index charts. Small caps lagged and the I-fund posted a more modest loss despite another rally in the dollar. Bonds rallied as yields fell sharply in front of today's FOMC meeting.
(The most current commentary is always posted here: www.tsptalk.com/comments.php)
| Daily TSP Funds Return
More returns |
Today is day two of the FOMC meeting and we'll get a policy statement and interest rate decision announced at 2 PM ET.
Trump and Powell have butted heads on interest rates, but honestly both have good points.
Trump's view on rates is that we could save billions (100's of billions?) of dollars in interest payments on the national debt with a lower rate.
The Fed is still saying tariffs are an unknown on the economy and inflation so they don't want to act prematurely. They have been predicting a cut at the September meeting for a long time so here's a question that each side might be asking:
If you're going to cut in September anyway, why not just do it now?
On the other side, we've waited all year, why not just wait until September as expected?
I don't have the answer, but in the Fed's defense to keep rates on hold, GDPNow's model estimate for real GDP growth in the second quarter of 2025 has been moved up to 2.9 percent, up from 2.4 percent. Source: https://www.atlantafed.org/cqer/research/gdpnow.aspx
A 2.9% GDP is not an economy that currently needs help.
It may depend on the employment data because the Fed will cut rates if they see signs of the labor market struggling. I don't know what data they have right now, but the weekly numbers come out on Thursday, and the monthly jobs report doesn't come out until Friday.
Estimates are a little lighter than the prior months, so a case can be made to do it now before any damage is done.
Briefing.com estimates:
Nonfarm Payrolls
Forecast: 95K,
Consensus: 102K
Prior: 147K
Unemployment Rate
Forecast: 4.2%
Consensus: 4.2%
Prior: 4.1%
The bond market is signaling a rate cut. The Fed tends to follow the all knowing 2-Year Treasury Yield, which is currently 3.88%. The current Fed Funds Rate is 4.25% to 4.5%. They may be two quarter point cuts behind according to the bond market.
The 10-year Treasury yield fell sharply yesterday and is looking for support near 4.34% at the 200-day average. That average has held several times in recent weeks, but that inverted head and shoulders pattern makes a good argument that this may eventually break higher.
The dollar was up sharply for a 4th straight day. That inverted head and shoulders pattern did break to the upside. Sentiment in the dollar had been very bearish, and it still is, so it could have more bounce left. The question is whether this is an oversold, overly bearish, bounce that is destined to fail?
The S&P 500 (C-fund) was down modesty yesterday and I won't go all loony bearish on you, but it also created a negative outside reversal day - a pattern that can be an ominous sign, but if you're a regular reader here you know that the small caps had a major negative outside reversal day on July 15 and the S-fund is still positive since that close, so it was a false flag as of now.
The MACD indicator (Moving Average Convergence Divergence) has been making lower highs as the S&P 500 has been making higher highs, so that is a negative divergence and a possible warning sign.
The price of oil shot higher again yesterday, and once again it did so while the dollar was rallying, which makes the move that much more impressive. It's an interesting formation - a sort of head and shoulders pattern that would typically break down, but it is not orthodox in that it is slanting upward. I think the 72.50 area is a price to watch.
The longer-term chart shows that it is still in a long descending trend and it confirms some potential resistance near 72.50.
Microsoft and META report earnings after the closing bell today, and Apple and Amazon report after the close tomorrow.
We will get the July jobs report on Friday morning.
The DWCPF / S-fund technically created another negative outside reversal day yesterday, but it wasn't as pronounced as the one created on July 15, which to me was a major red flag, but so far the index / S-fund has held up well. 2350 looks like a key pivot point, and there is an open gap down by 2240, with a couple of other support areas in between. If 2350 breaks, be careful.
ACWX (I-fund) was down just modestly despite the 0.25% gain in the dollar. Perhaps Monday's loss was considered overdone, but when the dollar is rallying, the US TSP funds tend to outperform the I-fund, so we'll have to see how this new trend progresses.
BND (bonds / F-fund) had a big day and it looks like this is on its way to test the top of that red channel again. Of course it is an FOMC meeting day and yields could move dramatically. It all depends on the Fed's new monetary policy.
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.
