Stocks rallied out of the gate on Monday, holding onto the those Sunday night futures' gains. The Dow gained 330-points and we saw 1% plus gains almost across the board. It was the first day after the big first quarter and some follow-through may not be a big surprise on a Monday, but as we talked about yesterday, a new month (usually within the first 1 - 3 days) can trigger reversals from a major move in the prior month. We'll see.
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While the yield curve with the 90-day and the 10-year Treasury is no longer inverted right now after a bounce in the 10-year yield and a dip in the 90-day, the 90-day is still higher than the 2-year yield, which is higher than the 5-year yield. So, the initial concern for stocks, which we saw early last week, may have waned on that 90-day / 10-year inversion, but there's still some issues.
There was a strong ISM report released yesterday that shot the 10-year yield higher, and that was music to the ears of Wall Street.
We get the March Jobs report on Friday, and after February's report came up extremely light, it will be a big deal. If you recall it was the government shutdown that was blamed for the big miss last month (just +20,000), so we'll see how close we get to the 170,000 March estimates. The unemployment rate is expected to be 3.8% and wage growth +0.2%.
With the Fed in dovish mode, the question is whether bad news will be good or bad news for stocks. Another big miss and we may hear more speculation about a rate cut. And even if the report comes out stronger than expected, everyone knows the Fed is on hold and basically committed to no more rate hikes this year, so like yesterday's big ISM report, stocks may like it.
Earnings season is getting closer but so far not much in the way of preemptive warnings. The market seems to be looking past first quarter earnings, which are expected to be light, and last December's correction was likely reacting to that.
The S&P 500 (C-fund) rallied up to a new 2019 high, hitting the levels we hadn't seen since early October last year. The first trading day of a new month and/or new quarter can do that, but we'll see what the next two days have in store as there is a tendency for reversals during the first 1 - 3 days. There are some technical issues, but that's probably being nitpicky since new highs are obviously bullish.
The inverted head and shoulders pattern on the S&P 500 hasn't filled that right shoulder as I thought it could, and if I had to be critical of this, it may be to say that a market that moves up without proper consolidation first, can sometimes have a weaker foundation when it does breakout. It's not necessary, but ideally we'd want to see some equal action, or something somewhat similar, on each side of a head and shoulders pattern. The right shoulder here is barely a shoulder by comparison.
The DWCPF (S-fund) rallied right up to the current short-term resistance line. These types of resistance lines aren't usually too strong, but it is there and may get in the way.
The Dow Transportation Index had a huge day, and strong economic data can do that. But again, is strong data what the market wants, or do they want low interest rates and shaky data? I'm confused.
The Financials had a big day, as you might expect when the Treasury yields rally like they did.
The AGG (F-fund) came down hard as we finally saw yields bounce back from their severe decline in March. There's a big gap near 107.90 that could be a target, but there's also rising support above 108. The strong ISM manufacturing report yesterday took some of the wind out of the weak economy theory, but it's just one report and certainly not a trend changer yet.
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
Thanks for reading. We'll see you back here tomorrow.
Tom Crowley
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 use additional methods and strategies to determine fund positions.
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While the yield curve with the 90-day and the 10-year Treasury is no longer inverted right now after a bounce in the 10-year yield and a dip in the 90-day, the 90-day is still higher than the 2-year yield, which is higher than the 5-year yield. So, the initial concern for stocks, which we saw early last week, may have waned on that 90-day / 10-year inversion, but there's still some issues.
There was a strong ISM report released yesterday that shot the 10-year yield higher, and that was music to the ears of Wall Street.
We get the March Jobs report on Friday, and after February's report came up extremely light, it will be a big deal. If you recall it was the government shutdown that was blamed for the big miss last month (just +20,000), so we'll see how close we get to the 170,000 March estimates. The unemployment rate is expected to be 3.8% and wage growth +0.2%.
With the Fed in dovish mode, the question is whether bad news will be good or bad news for stocks. Another big miss and we may hear more speculation about a rate cut. And even if the report comes out stronger than expected, everyone knows the Fed is on hold and basically committed to no more rate hikes this year, so like yesterday's big ISM report, stocks may like it.
Earnings season is getting closer but so far not much in the way of preemptive warnings. The market seems to be looking past first quarter earnings, which are expected to be light, and last December's correction was likely reacting to that.
The S&P 500 (C-fund) rallied up to a new 2019 high, hitting the levels we hadn't seen since early October last year. The first trading day of a new month and/or new quarter can do that, but we'll see what the next two days have in store as there is a tendency for reversals during the first 1 - 3 days. There are some technical issues, but that's probably being nitpicky since new highs are obviously bullish.
The inverted head and shoulders pattern on the S&P 500 hasn't filled that right shoulder as I thought it could, and if I had to be critical of this, it may be to say that a market that moves up without proper consolidation first, can sometimes have a weaker foundation when it does breakout. It's not necessary, but ideally we'd want to see some equal action, or something somewhat similar, on each side of a head and shoulders pattern. The right shoulder here is barely a shoulder by comparison.
The DWCPF (S-fund) rallied right up to the current short-term resistance line. These types of resistance lines aren't usually too strong, but it is there and may get in the way.
The Dow Transportation Index had a huge day, and strong economic data can do that. But again, is strong data what the market wants, or do they want low interest rates and shaky data? I'm confused.
The Financials had a big day, as you might expect when the Treasury yields rally like they did.
The AGG (F-fund) came down hard as we finally saw yields bounce back from their severe decline in March. There's a big gap near 107.90 that could be a target, but there's also rising support above 108. The strong ISM manufacturing report yesterday took some of the wind out of the weak economy theory, but it's just one report and certainly not a trend changer yet.
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
Thanks for reading. We'll see you back here tomorrow.
Tom Crowley
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 use additional methods and strategies to determine fund positions.
