05/27/26
New day, new week, same direction. Oil was down sharply on Tuesday, as was the 10-year Treasury Yield, and this has been a recipe for a rally in the stock market. We also saw Micron, the newest $1 trillion company, jump 18% yesterday, hoisting up most of the major indices. It is not a Dow Component however, and with oil down sharply, the Dow was actually down 118-points.
No sign of any post-holiday reversal as yields and oil continued to fall yesterday, and stocks rallied. However, the charts are still not saying that a reversal can't happen. It just didn't happen yesterday.
The 10-year Treasury Yield is still in the process of filling the open gap from May 15, and yesterday it retested the breakout area above the March peak. This is all textbook cup and handle breakout / pullback action.
The price of oil did break down, but if you've been reading these commentaries, you know that pennant formations have a tendency to fake us out in one direction, only to eventually break out in the other. Why that would happen in this case with things trying to calm down in the Middle East, I don't know. It did close below the 50-day average for just the 2nd times in many months. Last time it closed right back above the average the next day.
A lot of what I have to say is a repeat of what I've been saying for weeks, basically because not much has changed, but things have gotten even more stretched to the upside.
Open gaps on charts are almost always filled within days on index charts. Now they are remaining open for weeks and months. The S-fund's DWCPF Index (chart is down in the TSP Fund chart section below) now has four open gaps on it since the March lows. The S&P 500 has three major open gaps and a couple of very small gaps.
We're in one of those periods where the famous quote, “Markets can remain irrational longer than you can remain solvent”, is in full bloom, and it really does remind me of the Dot Com days where stocks went up relentlessly in gobs, with a few shakeouts along the way.
Many of those high flying companies from the late 1990's are no longer around, or were bought up by bigger companies, but those Y2K driven days showed us that stocks can indeed move up irrationally, and all we can do is be patient and let the literal [micro] chips fall where they may.
I mentioned them not long ago, but Micron (MU), a company that has been around since 1977, just became a $1 trillion dollar company by tripling in value in the last several weeks. Over the last year or so it's gone from 60 to 900. Is this rational? Justified? I don't know, but the chart looks ridiculous. Fundamentally, it's not that over valued, but the rapid increase in price is more than frothy.
My take from the whole Dot Com bubble growth and burst was that, anyone who was brave enough to hold those high flyers throughout the years of volatility that moved the stock prices into the stratosphere, probably held on the way down as well. Will that happen this time around? I'm not sure. As I mentioned yesterday, the Dot Com boom lasted seven years and the A-I boom is a baby in comparison age-wise.
For giggles, let's look at a couple of hot Dot Com companies and what happened. I could name dozens, but here are a couple I followed back then. Ciena went from about $35 in 1998 to over $1000 by 2000. Less than two years later it was in the single digits. (Today, 24 years later, it is $602.)
And here's one that looks familiar. Micron again. It was $10 in 1998, went to near $100 in 2000, then fell back to about $11 in 2002.
So, these are great traders, but if you're buying to hold, it may be a rough road at some point.
The S&P 500 (C-fund) made another new all-time high yesterday. If we're looking for a reason to be concerned, it was the second straight day that the index closed closer to the lows of the days than the highs, suggesting some possible profit taking is starting.
The Dow Transportation Index has been coming to life again after its round trip from 19,500 to 24,500 and back again. The drop in oil prices may be helping, but the relationship between oil and the Transports is complicated.
Lower oil prices makes for cheaper fuel for planes, trains, and automobiles, but lower prices also occurs when the economy is showing signs of slowing down. This time it is mostly about supply issues potentially improving if the Straight of Hormuz is fully reopened, so it's tough to say exactly why this is going up, but I do see that airlines stocks were flying yesterday. Pun intended.
Additional TSP Fund Charts:
DWCPF (S-fund) continues its rip higher after the two week pullback. Is it me or did that pullback go mostly unnoticed? It feels like stocks never go down. The open gaps are starting to add up.
ACWX (I-fund) broke out to a new high yesterday as the world is counting on some kind of deal that will send oil prices lower. Is it setting up for failure or is the I-fund back in play after underperforming for a few months?
BND (bonds / F-fund) completed the gap fill and the test of the 50-day average, as well as the broken support line. This is a line in the sand for bonds. The chart suggests the rally could end here, but if it recaptures 73.40 for a few days, then it will be a much more bullish set up.
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.
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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 use additional methods and strategies to determine fund positions.
New day, new week, same direction. Oil was down sharply on Tuesday, as was the 10-year Treasury Yield, and this has been a recipe for a rally in the stock market. We also saw Micron, the newest $1 trillion company, jump 18% yesterday, hoisting up most of the major indices. It is not a Dow Component however, and with oil down sharply, the Dow was actually down 118-points.
| Daily TSP Funds Return More returns |
No sign of any post-holiday reversal as yields and oil continued to fall yesterday, and stocks rallied. However, the charts are still not saying that a reversal can't happen. It just didn't happen yesterday.
The 10-year Treasury Yield is still in the process of filling the open gap from May 15, and yesterday it retested the breakout area above the March peak. This is all textbook cup and handle breakout / pullback action.
The price of oil did break down, but if you've been reading these commentaries, you know that pennant formations have a tendency to fake us out in one direction, only to eventually break out in the other. Why that would happen in this case with things trying to calm down in the Middle East, I don't know. It did close below the 50-day average for just the 2nd times in many months. Last time it closed right back above the average the next day.
A lot of what I have to say is a repeat of what I've been saying for weeks, basically because not much has changed, but things have gotten even more stretched to the upside.
Open gaps on charts are almost always filled within days on index charts. Now they are remaining open for weeks and months. The S-fund's DWCPF Index (chart is down in the TSP Fund chart section below) now has four open gaps on it since the March lows. The S&P 500 has three major open gaps and a couple of very small gaps.
We're in one of those periods where the famous quote, “Markets can remain irrational longer than you can remain solvent”, is in full bloom, and it really does remind me of the Dot Com days where stocks went up relentlessly in gobs, with a few shakeouts along the way.
Many of those high flying companies from the late 1990's are no longer around, or were bought up by bigger companies, but those Y2K driven days showed us that stocks can indeed move up irrationally, and all we can do is be patient and let the literal [micro] chips fall where they may.
I mentioned them not long ago, but Micron (MU), a company that has been around since 1977, just became a $1 trillion dollar company by tripling in value in the last several weeks. Over the last year or so it's gone from 60 to 900. Is this rational? Justified? I don't know, but the chart looks ridiculous. Fundamentally, it's not that over valued, but the rapid increase in price is more than frothy.
My take from the whole Dot Com bubble growth and burst was that, anyone who was brave enough to hold those high flyers throughout the years of volatility that moved the stock prices into the stratosphere, probably held on the way down as well. Will that happen this time around? I'm not sure. As I mentioned yesterday, the Dot Com boom lasted seven years and the A-I boom is a baby in comparison age-wise.
For giggles, let's look at a couple of hot Dot Com companies and what happened. I could name dozens, but here are a couple I followed back then. Ciena went from about $35 in 1998 to over $1000 by 2000. Less than two years later it was in the single digits. (Today, 24 years later, it is $602.)
And here's one that looks familiar. Micron again. It was $10 in 1998, went to near $100 in 2000, then fell back to about $11 in 2002.
So, these are great traders, but if you're buying to hold, it may be a rough road at some point.
The S&P 500 (C-fund) made another new all-time high yesterday. If we're looking for a reason to be concerned, it was the second straight day that the index closed closer to the lows of the days than the highs, suggesting some possible profit taking is starting.
The Dow Transportation Index has been coming to life again after its round trip from 19,500 to 24,500 and back again. The drop in oil prices may be helping, but the relationship between oil and the Transports is complicated.
Lower oil prices makes for cheaper fuel for planes, trains, and automobiles, but lower prices also occurs when the economy is showing signs of slowing down. This time it is mostly about supply issues potentially improving if the Straight of Hormuz is fully reopened, so it's tough to say exactly why this is going up, but I do see that airlines stocks were flying yesterday. Pun intended.
Additional TSP Fund Charts:
DWCPF (S-fund) continues its rip higher after the two week pullback. Is it me or did that pullback go mostly unnoticed? It feels like stocks never go down. The open gaps are starting to add up.
ACWX (I-fund) broke out to a new high yesterday as the world is counting on some kind of deal that will send oil prices lower. Is it setting up for failure or is the I-fund back in play after underperforming for a few months?
BND (bonds / F-fund) completed the gap fill and the test of the 50-day average, as well as the broken support line. This is a line in the sand for bonds. The chart suggests the rally could end here, but if it recaptures 73.40 for a few days, then it will be a much more bullish set up.
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.
