06/02/26
It was the first day of a new month, which tends to have a bullish bias, so any "new month, new direction" would likely start today or tomorrow, if that is going to be the case. Otherwise, the large cap indices did a very good job of trading positive with oil and yields up as much as they were. Even the small caps' S-fund had nice gain, and all this was done with more stocks down than up on the day.
It was basically even but technically more stocks were down yesterday and only the tech and energy sectors were positive on the day. When Nvidia is up over 6% on the day, most of the major indices will be positive.
The headwind yesterday was the deterioration of the ceasefire negotiations, but that is almost an hour by hour deal now. But keeping an eye on the price of oil and the 10-year Treasury Yield, we knew something was going wrong. As for the charts, these two were trying to tell us that this was coming, although both took their time as these pullbacks lasted a little longer than I expected.
Both reversed off their highs, but the support levels held and we'll just have to see if this will lead to a new direction going forward, or if the pullbacks will resume.
The fact that the indices did so well may have something to do with the new month where June 1st has a good track record, but that advantage starts to diminish as the month goes on. June actually has a reputation do go with the flow, meaning if the action was good leading up to it, it does well, and if the action was more bearish, it tends to struggle. So this advantage goes to the bulls, although the end of the month does look bearish overall.
Source: www.sentimentrader.com
The S&P 500 (C-fund) keeps on keeping on as the F-flag extends out. This flag will break at some point but unlike many other technical patterns, this one doesn't really give us much of a head's up when it is about to happen, but these do tend to eventually break down.
The negative divergence in the MACD indicator certainly has not been a great clue, although typically this negative divergence is a set up for a pullback.
The S-fund had a good day yesterday but I noticed that the IWM, or Russell 2000 small caps Index, is also flashing major negative divergences. You can see that prior divergences did leave to meaningful pullbacks.
The freight train is still coming down the track and the bears that have tried to step in front of it have not fared well, and if anything the skeptical investors are likely helping the market continue to climb the wall of worry. There are some signs of extreme bullish sentiment (which is bearish), but as I have been saying recently, sentiment is mostly underwhelming giving the action, and that means more cash is on the sidelines to fuel the rally.
When they (the reluctant buyers) capitulate, I don't know, but we have the new Fed test for the market likely coming up, and the calendar suggests that the mid-term election year seasonality may be ready to start getting more bearish.
The futures were down sharply on Monday evening, basically erasing Monday's gains already, but we'll see if the dip buyers show up on Tuesday.
Additional TSP Fund Charts::
I mentioned some possible issues with the small caps of the Russell 2000 (IWM) above but this DWCPF (S-fund) chart still looks good, especially after a positive reversal day. The bad news, the Russell 2000 futures were down 0.65% on Monday night, last I checked. Unfortunately, the S-fund will not likely do well if that Russell 2000 chart does rollover.
ACWX (I-fund) is another good looking chart that survived a moderate pullback earlier in May, but it is reaching for new highs almost daily recently. The bearish side of the argument it is now testing the top of that blue F-flag.
BND (bonds / F-fund) had a nice comeback yesterday after falling back below the pennant formation and the 50-day average, but it closed strong and back above all of the resistance. It is still in the neighborhood so we may need to see a little more before getting bullish on bonds. It still looks like yields may want to go higher, and bond prices and the F-fund would go down if yields go higher.
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 use additional methods and strategies to determine fund positions.
It was the first day of a new month, which tends to have a bullish bias, so any "new month, new direction" would likely start today or tomorrow, if that is going to be the case. Otherwise, the large cap indices did a very good job of trading positive with oil and yields up as much as they were. Even the small caps' S-fund had nice gain, and all this was done with more stocks down than up on the day.
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It was basically even but technically more stocks were down yesterday and only the tech and energy sectors were positive on the day. When Nvidia is up over 6% on the day, most of the major indices will be positive.
The headwind yesterday was the deterioration of the ceasefire negotiations, but that is almost an hour by hour deal now. But keeping an eye on the price of oil and the 10-year Treasury Yield, we knew something was going wrong. As for the charts, these two were trying to tell us that this was coming, although both took their time as these pullbacks lasted a little longer than I expected.
Both reversed off their highs, but the support levels held and we'll just have to see if this will lead to a new direction going forward, or if the pullbacks will resume.
The fact that the indices did so well may have something to do with the new month where June 1st has a good track record, but that advantage starts to diminish as the month goes on. June actually has a reputation do go with the flow, meaning if the action was good leading up to it, it does well, and if the action was more bearish, it tends to struggle. So this advantage goes to the bulls, although the end of the month does look bearish overall.
Source: www.sentimentrader.com
The S&P 500 (C-fund) keeps on keeping on as the F-flag extends out. This flag will break at some point but unlike many other technical patterns, this one doesn't really give us much of a head's up when it is about to happen, but these do tend to eventually break down.
The negative divergence in the MACD indicator certainly has not been a great clue, although typically this negative divergence is a set up for a pullback.
The S-fund had a good day yesterday but I noticed that the IWM, or Russell 2000 small caps Index, is also flashing major negative divergences. You can see that prior divergences did leave to meaningful pullbacks.
The freight train is still coming down the track and the bears that have tried to step in front of it have not fared well, and if anything the skeptical investors are likely helping the market continue to climb the wall of worry. There are some signs of extreme bullish sentiment (which is bearish), but as I have been saying recently, sentiment is mostly underwhelming giving the action, and that means more cash is on the sidelines to fuel the rally.
When they (the reluctant buyers) capitulate, I don't know, but we have the new Fed test for the market likely coming up, and the calendar suggests that the mid-term election year seasonality may be ready to start getting more bearish.
The futures were down sharply on Monday evening, basically erasing Monday's gains already, but we'll see if the dip buyers show up on Tuesday.
Additional TSP Fund Charts::
I mentioned some possible issues with the small caps of the Russell 2000 (IWM) above but this DWCPF (S-fund) chart still looks good, especially after a positive reversal day. The bad news, the Russell 2000 futures were down 0.65% on Monday night, last I checked. Unfortunately, the S-fund will not likely do well if that Russell 2000 chart does rollover.
ACWX (I-fund) is another good looking chart that survived a moderate pullback earlier in May, but it is reaching for new highs almost daily recently. The bearish side of the argument it is now testing the top of that blue F-flag.
BND (bonds / F-fund) had a nice comeback yesterday after falling back below the pennant formation and the 50-day average, but it closed strong and back above all of the resistance. It is still in the neighborhood so we may need to see a little more before getting bullish on bonds. It still looks like yields may want to go higher, and bond prices and the F-fund would go down if yields go higher.
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
Updated monthly:
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 use additional methods and strategies to determine fund positions.
