03/02/26
Stocks fell on Friday although the indices did climb well off their lows to close near the highs of the day, just to keep us guessing as to which way this market is going to break, after a 5-month consolidation. Small caps got hit the hardest despite a big drop in Treasury yields. The I-fund continues to outperform the US stock market funds. But now war begins. What's next?
The situation is fluid, and what you see in the charts here may or may not change significantly by the time trading begins. If the stock market does react to the start of the Iran war it may be more of a reaction to the price of oil or the dollar because it won't have much of an impact on the demand for semiconductors, AI growth, etc., so I suspect any knee-jerk reaction will be nothing more than that - a knee jerk reaction that may just snap back to "normal" rather quickly.
The price of oil has been climbing in anticipation of something like this, and the futures are up on Sunday evening, but it may all depend on how the situation in the Strait of Hormuz is handled, re: any blockades or other Iranian interference that could cut off supplies. Otherwise, it could be a buy the rumor, sell the news situation if that is under control.
If bitcoin, one "commodity" that trades 24 / 7, is any indication, it barely moved over the weekend.
What did move the market on Friday was the hotter than expected PPI data, which suggested inflation is still sticky on the upside. What we would typically see when we get a hot inflation report is yields moving higher. But that's not what happened on Friday. The 10-year Treasury Yield fell sharply, just to keep us guessing.
It could be for many reasons including perhaps a reaction that the US economy could slowdown due to higher inflation, although we also got a strong Chicago PMI number suggesting otherwise. So my guess is that yields fell (and bond prices and the F-fund went up) because of what was going on in Iran, and it was a safety play while stocks were falling.
Rather than guess what this weekend's news is going to do to the market, I'm leaning more toward taking advantage of any overblown reaction - if there is one. The market has been in such a tight range that the lines of support and resistance have been almost impenetrable, but what the market loves to do is get you leaning the wrong way before it eventually takes its ultimate direction and has a meaningful breakout - either up or down..
It's hard to look at this S&P 500 (C-fund) chart and not see the support holding as the consolidating gets drawn out. Very short-term traders could have made good money buying the support and selling the resistance. That's easier said than done, especially for us with a 12 noon ET deadline and just 2 to 3 transactions per month, so we had to look at it differently. Basically we have to ask what is this pattern trying to tell us? And, if there is a breakout to the up or the downside, will it be a short-term head fake to get us leaning the wrong way?
Following up on the Financials, which we mentioned on Friday had recently rebounded for three days. Well, that rebound failed at the 200-day moving average and it lost 2%. It remains in a downtrend and many analysts believe the stock market cannot breakout with the financials coming along for the ride, so this is concerning, unless it is planning some kind of double bottom formation.
I wanted to make note of the Premium Services' return through February. All are doing just fine when we compare the returns to the S&P 500, or even the S-fund. But obviously they haven't been taking enough advantage of the I-fund fund's continued out-performance, and for the second straight year, the I-fund has been running away from the completion. But can it continue?
I have some money in the I-fund but I have been gun shy about getting too aggressive with it myself because of the parabolic move the ACWX (I fund) has made, expecting some kind of backing and filling, but that hasn't happened yet.
If this weekly chart is going to test that 200-week average, as it tends to do every couple of years, need I say more?
However, even if the I-fund is due for a breather, this longer term I-fund / C-fund ratio chart shows that the ACWX only recently broke a long downtrend of the S&P 500 out performing it. This could be a major change in trend. But again, in the short-term, a pullback would not be a surprise.
The futures opened up deep in the red, but again, watch out for a knee-jerk reaction that could flip around if the bulls are looking for another buy the dip opportunity, as they have for months.
Additional TSP Fund Charts:
DWCPF (S-fund) fell sharply on Friday, and the head and shoulders pattern is still intact. Support has been tough as nails so far, but the bearish pattern suggests a breakdown. Meanwhile the S&P 500 chart up above was looking better. Interesting dichotomy. I will point out that head and shoulders patterns, which are typically bearish, are also considered continuation patterns, meaning they often break in the direction that the prior trend was moving before the pattern, which was up. They are much more powerful patterns in a downtrend. And, just to make things more confusing, major tops can be made when a head and shoulders pattern is large enough. At 3-months old, I would say this one is mid-sized.
BND (bonds / F-fund) rallied to new highs despite inflationary concerns. Yields fell with the threat of war in the air, and that sent bond prices higher. It's a safety trade in times like this, but this looks to be getting a little extended.
Thanks so much for reading! We'll see you 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
Questions, comments, or issues with today's commentary? We can discuss it in the Forum.
Daily Market Commentary Archives
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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.
Stocks fell on Friday although the indices did climb well off their lows to close near the highs of the day, just to keep us guessing as to which way this market is going to break, after a 5-month consolidation. Small caps got hit the hardest despite a big drop in Treasury yields. The I-fund continues to outperform the US stock market funds. But now war begins. What's next?
| Daily TSP Funds Return
More returns |
The price of oil has been climbing in anticipation of something like this, and the futures are up on Sunday evening, but it may all depend on how the situation in the Strait of Hormuz is handled, re: any blockades or other Iranian interference that could cut off supplies. Otherwise, it could be a buy the rumor, sell the news situation if that is under control.
If bitcoin, one "commodity" that trades 24 / 7, is any indication, it barely moved over the weekend.
What did move the market on Friday was the hotter than expected PPI data, which suggested inflation is still sticky on the upside. What we would typically see when we get a hot inflation report is yields moving higher. But that's not what happened on Friday. The 10-year Treasury Yield fell sharply, just to keep us guessing.
It could be for many reasons including perhaps a reaction that the US economy could slowdown due to higher inflation, although we also got a strong Chicago PMI number suggesting otherwise. So my guess is that yields fell (and bond prices and the F-fund went up) because of what was going on in Iran, and it was a safety play while stocks were falling.
Rather than guess what this weekend's news is going to do to the market, I'm leaning more toward taking advantage of any overblown reaction - if there is one. The market has been in such a tight range that the lines of support and resistance have been almost impenetrable, but what the market loves to do is get you leaning the wrong way before it eventually takes its ultimate direction and has a meaningful breakout - either up or down..
It's hard to look at this S&P 500 (C-fund) chart and not see the support holding as the consolidating gets drawn out. Very short-term traders could have made good money buying the support and selling the resistance. That's easier said than done, especially for us with a 12 noon ET deadline and just 2 to 3 transactions per month, so we had to look at it differently. Basically we have to ask what is this pattern trying to tell us? And, if there is a breakout to the up or the downside, will it be a short-term head fake to get us leaning the wrong way?
Following up on the Financials, which we mentioned on Friday had recently rebounded for three days. Well, that rebound failed at the 200-day moving average and it lost 2%. It remains in a downtrend and many analysts believe the stock market cannot breakout with the financials coming along for the ride, so this is concerning, unless it is planning some kind of double bottom formation.
I wanted to make note of the Premium Services' return through February. All are doing just fine when we compare the returns to the S&P 500, or even the S-fund. But obviously they haven't been taking enough advantage of the I-fund fund's continued out-performance, and for the second straight year, the I-fund has been running away from the completion. But can it continue?
I have some money in the I-fund but I have been gun shy about getting too aggressive with it myself because of the parabolic move the ACWX (I fund) has made, expecting some kind of backing and filling, but that hasn't happened yet.
If this weekly chart is going to test that 200-week average, as it tends to do every couple of years, need I say more?
However, even if the I-fund is due for a breather, this longer term I-fund / C-fund ratio chart shows that the ACWX only recently broke a long downtrend of the S&P 500 out performing it. This could be a major change in trend. But again, in the short-term, a pullback would not be a surprise.
The futures opened up deep in the red, but again, watch out for a knee-jerk reaction that could flip around if the bulls are looking for another buy the dip opportunity, as they have for months.
Additional TSP Fund Charts:
DWCPF (S-fund) fell sharply on Friday, and the head and shoulders pattern is still intact. Support has been tough as nails so far, but the bearish pattern suggests a breakdown. Meanwhile the S&P 500 chart up above was looking better. Interesting dichotomy. I will point out that head and shoulders patterns, which are typically bearish, are also considered continuation patterns, meaning they often break in the direction that the prior trend was moving before the pattern, which was up. They are much more powerful patterns in a downtrend. And, just to make things more confusing, major tops can be made when a head and shoulders pattern is large enough. At 3-months old, I would say this one is mid-sized.
BND (bonds / F-fund) rallied to new highs despite inflationary concerns. Yields fell with the threat of war in the air, and that sent bond prices higher. It's a safety trade in times like this, but this looks to be getting a little extended.
Thanks so much for reading! We'll see you 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
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.
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