Stocks opened sharply higher on Wednesday after a stronger than expected economic report. The Dow ended the day up 54-points, but that was after an afternoon sell-off that took away much of the morning progress. Despite the selling, there was a lot of green out there and small caps outperformed for a change, while bonds were hit hard.
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We got a strong ISM- non-Manufacturing report Wednesday morning that handily beat estimates, and that set the tone for bullish morning for stocks, and a sell-off in bonds as yields spiked higher. Unfortunately for the bulls, it didn't last into the close and we saw some late reversals in both stocks and bonds.
As we talked about yesterday, the financial sector and the small caps of Russell 2000, which has a lot of small financial / banks stocks in it, have been struggling. But yesterday the yield on the 10-Year Treasury spiked up with that ISM report and both the financials and the small caps applauded that rise in yields which steepened the yield curve. The 3.16% closing yield was the highest since 2011, after a double top pullback earlier this year, as you can see on this long-term monthly chart.
With everything else near highs, investors were chomping at the bit (or is it champing?) for a reason to buy the beaten down small caps and yesterday they got a reason as the small financial stocks soared. The chart I showed yesterday of the small caps gave some hope that the failed bull flag could rebound like we saw in late July and into August. It will be interesting to see if today is a choppy day, just to confuse those who bought yesterday. That's what happened on Aug. 1, anyway.
We get the September Jobs Report on Friday morning and estimates are looking for a gain of about 185,000 jobs and an unemployment rate of 3.8%
HOLIDAY CLOSING message from tsp.gov: "Some financial markets will be closed on Monday, October 8 in observance of the Columbus Day holiday. The Thrift Savings Plan will also be closed. Transactions that would have been processed Monday night (October 8) will be processed Tuesday night (October 9), at Tuesday's closing share prices."
The S&P 500 / C-fund gave up some big early gains to end the day with just a 0.07% gain. For the last 2-weeks the index has been basing and this type of action over the last several months has led to new highs each time. The weak closes we've seen lately may be a warning sign that this one could be different, but of course for those who have been saying that have been missing breakouts for months now.
The Nasdaq posted a nice gain but closed off its highs and remains in that long bearish looking flag formation. It does remain above longer-term rising support.
The EAFE Index was down on the day with the help of another 0.3% rally in the dollar. The EFA is flirting with the 50 and 200-day EMAs.
We've talked in our Plus reports about the growing number of negative divergences that we are seeing in various places. Here's anther one pointed out by sentimenTrader.com. This one shows us that less than 50% of stocks in the NYSE Composite Index are trading above their 200-day average, which is very unusual when the Dow is at an all-time high.
Chart provided courtesy of www.sentimentrader.com
The AGG (bonds) got hit hard yesterday and that was due to the strong economic report yesterday which sent yields rallying and bond prices falling.
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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We got a strong ISM- non-Manufacturing report Wednesday morning that handily beat estimates, and that set the tone for bullish morning for stocks, and a sell-off in bonds as yields spiked higher. Unfortunately for the bulls, it didn't last into the close and we saw some late reversals in both stocks and bonds.
As we talked about yesterday, the financial sector and the small caps of Russell 2000, which has a lot of small financial / banks stocks in it, have been struggling. But yesterday the yield on the 10-Year Treasury spiked up with that ISM report and both the financials and the small caps applauded that rise in yields which steepened the yield curve. The 3.16% closing yield was the highest since 2011, after a double top pullback earlier this year, as you can see on this long-term monthly chart.
With everything else near highs, investors were chomping at the bit (or is it champing?) for a reason to buy the beaten down small caps and yesterday they got a reason as the small financial stocks soared. The chart I showed yesterday of the small caps gave some hope that the failed bull flag could rebound like we saw in late July and into August. It will be interesting to see if today is a choppy day, just to confuse those who bought yesterday. That's what happened on Aug. 1, anyway.
We get the September Jobs Report on Friday morning and estimates are looking for a gain of about 185,000 jobs and an unemployment rate of 3.8%
HOLIDAY CLOSING message from tsp.gov: "Some financial markets will be closed on Monday, October 8 in observance of the Columbus Day holiday. The Thrift Savings Plan will also be closed. Transactions that would have been processed Monday night (October 8) will be processed Tuesday night (October 9), at Tuesday's closing share prices."
The S&P 500 / C-fund gave up some big early gains to end the day with just a 0.07% gain. For the last 2-weeks the index has been basing and this type of action over the last several months has led to new highs each time. The weak closes we've seen lately may be a warning sign that this one could be different, but of course for those who have been saying that have been missing breakouts for months now.
The Nasdaq posted a nice gain but closed off its highs and remains in that long bearish looking flag formation. It does remain above longer-term rising support.
The EAFE Index was down on the day with the help of another 0.3% rally in the dollar. The EFA is flirting with the 50 and 200-day EMAs.
We've talked in our Plus reports about the growing number of negative divergences that we are seeing in various places. Here's anther one pointed out by sentimenTrader.com. This one shows us that less than 50% of stocks in the NYSE Composite Index are trading above their 200-day average, which is very unusual when the Dow is at an all-time high.
Chart provided courtesy of www.sentimentrader.com
The AGG (bonds) got hit hard yesterday and that was due to the strong economic report yesterday which sent yields rallying and bond prices falling.
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.
