Stocks took another one on the chin on Tuesday, making things tough for the bulls during a holiday week where many expected a little positive push from behind. The Dow fell another 552-points making it nearly 1000 points in two days. The other indices fell about 1.6% to 1.8% on the day with most of them getting close to testing the October lows, and in the case of the Nasdaq, making a lower low. The Dow and S&P 500 are now negative for the year.
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Oil prices accelerated to the downside yesterday and this downturn can be explained somewhat by the Iranian sanctions that were not imposed, and what likely caused oil to go up to some degree in the first place. But it has fallen to new lows and so there is also the possibility that this is an interpretation that a slowdown in the economy will decrease demand.
And bond yields are sinking, as we suspected with oil's price decline, and that's another possible clue of a slow down in the economy. Now yesterday I mentioned that we are seeing signs of a potential recession, but that doesn't have to be the case. The market is trying to tell us something but it could just be looking for a slowdown in the economy, and not so much a recession where growth goes negative for two consecutive of quarters. By the way, the Fed Funds Futures are showing a decrease in the chances of a rate hike in the December FOMC meeting from 90% to a 75% chance.
In 2015 and 2016 we had such a situation where we never did get an official recession, but stocks pulled back about 15% during a slowdown, so it's possible that's all we'll see this time. And with the indices down 10% to 15% already, and many individual stocks down over 20%, it's possible that the slowdown is close to being priced in. But that may be the best case scenario since obviously something is wrong.
Notice that the declines in 2015 and 2016 both made successful double bottoms before rallying back.
Many are now looking for the "wooosh" type of high volume capitulation selloff to trigger a fear-driven buyable low, but with two of the strongest seasonal days coming up, does that mean they'll have to wait until next week? Trading volume will be light over the next two days and we could see some pushing around, but I suppose it depends if enough folks are just talking the days off or if the action is too hot for them to do so.
From www.tsp.gov: HOLIDAY CLOSING - "Some financial markets will be closed on Thursday, November 22 in observance of the Thanksgiving Day holiday. The Thrift Savings Plan will also be closed. Transactions that would have been processed Thursday night (November 22) will be processed Friday night (November 23), at Friday's closing share prices."
The S&P 500 / C-fund is now flirting with the prior lows and near some important support levels. I don't think I need to explain the importance of them holding.
The DWCPF (S-fund) basically touched the October low and got a bit of a bounce since it closed off those lows. A small open gap was created Tuesday morning. Perhaps a holiday rally can fill it.
The Nasdaq fell through the October lows but we did see some buying and positive returns in some of the big tech stocks like Facebook and Nvidia, which had both been beaten up badly of late.
The EAFE Index / I-fund is in a bear market and acting like it, after breaking down 5 months ago. The S&P 500 and other U.S. indices seem to be trailing the EAFE by several months and unfortunately may be showing the path of what is to come for the U.S. indices.
The High Yield Corporate Bonds are having a difficult time of it, and that's going to be a problem for stocks if it doesn't improve. Technically, it is broken now with a downtrend and trading below the 200-day EMA. Any relief rallies may now struggle at the 200-day EMA, should it get back there. Without a good credit market, stocks are unlikely to do well.
The AGG (bonds / F-fund) was off slightly but maintaining above the 50-day EMA. There may be some resistance near 104.80, which would be the top of the recent range.
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. Enjoy your Thanksgiving! We'll see you on Friday with a brief commentary.
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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Oil prices accelerated to the downside yesterday and this downturn can be explained somewhat by the Iranian sanctions that were not imposed, and what likely caused oil to go up to some degree in the first place. But it has fallen to new lows and so there is also the possibility that this is an interpretation that a slowdown in the economy will decrease demand.
And bond yields are sinking, as we suspected with oil's price decline, and that's another possible clue of a slow down in the economy. Now yesterday I mentioned that we are seeing signs of a potential recession, but that doesn't have to be the case. The market is trying to tell us something but it could just be looking for a slowdown in the economy, and not so much a recession where growth goes negative for two consecutive of quarters. By the way, the Fed Funds Futures are showing a decrease in the chances of a rate hike in the December FOMC meeting from 90% to a 75% chance.
In 2015 and 2016 we had such a situation where we never did get an official recession, but stocks pulled back about 15% during a slowdown, so it's possible that's all we'll see this time. And with the indices down 10% to 15% already, and many individual stocks down over 20%, it's possible that the slowdown is close to being priced in. But that may be the best case scenario since obviously something is wrong.
Notice that the declines in 2015 and 2016 both made successful double bottoms before rallying back.
Many are now looking for the "wooosh" type of high volume capitulation selloff to trigger a fear-driven buyable low, but with two of the strongest seasonal days coming up, does that mean they'll have to wait until next week? Trading volume will be light over the next two days and we could see some pushing around, but I suppose it depends if enough folks are just talking the days off or if the action is too hot for them to do so.
From www.tsp.gov: HOLIDAY CLOSING - "Some financial markets will be closed on Thursday, November 22 in observance of the Thanksgiving Day holiday. The Thrift Savings Plan will also be closed. Transactions that would have been processed Thursday night (November 22) will be processed Friday night (November 23), at Friday's closing share prices."
The S&P 500 / C-fund is now flirting with the prior lows and near some important support levels. I don't think I need to explain the importance of them holding.
The DWCPF (S-fund) basically touched the October low and got a bit of a bounce since it closed off those lows. A small open gap was created Tuesday morning. Perhaps a holiday rally can fill it.
The Nasdaq fell through the October lows but we did see some buying and positive returns in some of the big tech stocks like Facebook and Nvidia, which had both been beaten up badly of late.
The EAFE Index / I-fund is in a bear market and acting like it, after breaking down 5 months ago. The S&P 500 and other U.S. indices seem to be trailing the EAFE by several months and unfortunately may be showing the path of what is to come for the U.S. indices.
The High Yield Corporate Bonds are having a difficult time of it, and that's going to be a problem for stocks if it doesn't improve. Technically, it is broken now with a downtrend and trading below the 200-day EMA. Any relief rallies may now struggle at the 200-day EMA, should it get back there. Without a good credit market, stocks are unlikely to do well.
The AGG (bonds / F-fund) was off slightly but maintaining above the 50-day EMA. There may be some resistance near 104.80, which would be the top of the recent range.
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. Enjoy your Thanksgiving! We'll see you on Friday with a brief commentary.
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.
