05/06/26
The rally resumed on Tuesday after Monday's decline, and the pullback in oil was a big reason for it, but the semiconductors also continue to lead the tech indices higher. Bond yields were down following oil's lead, so bullish catalysts were at the back of the stock market yesterday.
It seemed pretty straight forward yesterday. There were no big headlines from the Middle East, oil dropped sharply, that sent yields lower, and the tech sector remains on fire, so the rally in stocks resumed.
I posted this in the forum yesterday, but I wanted to share it here to show that, like Treasury Yields, it is not the actual price of oil that matters as much as it is the direction it is moving. The price of WTIC oil is higher than where it was on March 9th, yet the S&P 500 is up 450 points since then. $110 may not be a deal breaker, but a move up there would likely push stock prices lower. If oil falls back to $85, stocks will move higher. That will work, until it doesn't. The market is always looking for a catalyst and the algorithms get programmed to follow the latest trends. Oil is the trend of the day.
Lower oil prices pushed yields down yesterday, but once again the move lower in yields did not break the recent ascending trend here. The 10-year Treasury is sitting near those summer of 2025 levels, after peaking at this level in March, and at 4.42%, it is still a long way from 5%, but...
... this longer-term chart may suggest that 5% may be in the cards if that cup and handle formation breaks out to the upside, as they tend to do. We haven't seen a close above 5% since 2007 - just before the financial crisis bear market started. I won't equate the two since financial conditions may not be the same, but the price of oil had something to do with those yields back then as well.
We saw the Dow Transportation Index have a parabolic move higher last month. Another sector moved up with it - the semiconductors.
The problem with parabolic moves is that, once they stop going up, the support can be so thin that the ride down can be almost as dramatic, as we saw with the Transports in recent weeks. Notice that the low in the Transports the last two days was above the gap that it just filled. Is this market leader saying something about the indices that follow it?
I think I am feeling a little too bearish for how good the action is.
We will get the April Jobs Report on Friday this week and estimates are looking for a gain of 60,000 to 95,000 jobs with an unemployment rate of 4.3%.
Additional TSP Fund Charts:
DWCPF (S-fund) closed at its highest level of the year after retracing Monday's negative outside reversal candlestick. Negative outside reversal days used to be a great indication of a imminent reversal. However, I have seen a few in the last couple of years that did not work. The one on Monday is not out of the picture yet, but yesterday's gain did a pretty good job of getting us to ignore it. Careful!
ACWX (I-fund) looks like it is trying to complete a handle of a possible bullish cup and handle formation. Oil will have to stay low if this is going to break out, but with the US indices at all time highs, it seems this one could be next?
BND (bonds / F-fund) was up yesterday, but it remains below key resistance, and remains vulnerable.
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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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.
The rally resumed on Tuesday after Monday's decline, and the pullback in oil was a big reason for it, but the semiconductors also continue to lead the tech indices higher. Bond yields were down following oil's lead, so bullish catalysts were at the back of the stock market yesterday.
| Daily TSP Funds Return More returns |
It seemed pretty straight forward yesterday. There were no big headlines from the Middle East, oil dropped sharply, that sent yields lower, and the tech sector remains on fire, so the rally in stocks resumed.
I posted this in the forum yesterday, but I wanted to share it here to show that, like Treasury Yields, it is not the actual price of oil that matters as much as it is the direction it is moving. The price of WTIC oil is higher than where it was on March 9th, yet the S&P 500 is up 450 points since then. $110 may not be a deal breaker, but a move up there would likely push stock prices lower. If oil falls back to $85, stocks will move higher. That will work, until it doesn't. The market is always looking for a catalyst and the algorithms get programmed to follow the latest trends. Oil is the trend of the day.
Lower oil prices pushed yields down yesterday, but once again the move lower in yields did not break the recent ascending trend here. The 10-year Treasury is sitting near those summer of 2025 levels, after peaking at this level in March, and at 4.42%, it is still a long way from 5%, but...
... this longer-term chart may suggest that 5% may be in the cards if that cup and handle formation breaks out to the upside, as they tend to do. We haven't seen a close above 5% since 2007 - just before the financial crisis bear market started. I won't equate the two since financial conditions may not be the same, but the price of oil had something to do with those yields back then as well.
We saw the Dow Transportation Index have a parabolic move higher last month. Another sector moved up with it - the semiconductors.
The problem with parabolic moves is that, once they stop going up, the support can be so thin that the ride down can be almost as dramatic, as we saw with the Transports in recent weeks. Notice that the low in the Transports the last two days was above the gap that it just filled. Is this market leader saying something about the indices that follow it?
I think I am feeling a little too bearish for how good the action is.
We will get the April Jobs Report on Friday this week and estimates are looking for a gain of 60,000 to 95,000 jobs with an unemployment rate of 4.3%.
Additional TSP Fund Charts:
DWCPF (S-fund) closed at its highest level of the year after retracing Monday's negative outside reversal candlestick. Negative outside reversal days used to be a great indication of a imminent reversal. However, I have seen a few in the last couple of years that did not work. The one on Monday is not out of the picture yet, but yesterday's gain did a pretty good job of getting us to ignore it. Careful!
ACWX (I-fund) looks like it is trying to complete a handle of a possible bullish cup and handle formation. Oil will have to stay low if this is going to break out, but with the US indices at all time highs, it seems this one could be next?
BND (bonds / F-fund) was up yesterday, but it remains below key resistance, and remains vulnerable.
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.
