09/09/25
With yields continuing to fall and a Federal Reserve now ready to cut interest rates, stocks rallied yesterday, and the small caps are continuing to outperform the large caps. The S&P 500 gained back some of Friday's losses and the chart has some short-term concerns, but the Nasdaq closed at a new all time high, and that's tough to argue with. The dollar was down keeping the I-fund hot and it too is near its all time highs.
Despite a litany of reasons why stocks should be coming down and many calls for a crash, the stock market has remained resilient, and has continued to trend higher with few signs of slowing down. The bullish arguments have actually been getting stronger with interest rates and tax rates coming down, and earnings moving up, but a market that has not experienced a 3% pullback in five months does feel frothy.
Now that interest rates are almost certainly coming down, is it possible that we will experience some kind of sell the news reaction next week when the Fed does cut? Or are there really investors waiting to see the cuts before they start buying, because investor sentiment is still underwhelming considering the bullish charts and setup, which look very promising.
Source: https://www.cnn.com/markets/fear-and-greed
Admittedly, I have been one of those calling for a pullback because, well just because 5% and 10% pullbacks are not uncommon, it's been a while, and we've been in the most bearish part of the calendar for stocks, but so far I've been wrong to hold as much cash as I have.
The 10-year Treasury Yield continues to slide lower. The chart looked like it wanted to go lower, and it did. A technical analyst can't ask for much more than that. It has been telling us, not only that the Fed may be cutting rates, but that they may have fallen behind.
The S&P 500 / C-fund, and even more so, the small caps, like lower interest rates, and this chart has shown investors have been anticipating them. Could this rollover and break below support? Of course, but it hasn't yet, and as I mentioned above, the test may come after the Fed does start to cut rates to see if there is a sell the news reaction, or if the surprisingly elevated percentage of bears out there will give up and start buying and propel the indices to another leg higher in the 4th quarter.
The Nasdaq did make a new closing high yesterday. Again, this could be stalling near the previous highs, but there's no sign yet that investors are done. It could change quickly, but it hasn't yet.
The market leading, economically sensitive Dow Transportation Index is showing some sign of fatigue and it may be just one of several question marks that may be keeping some people away. The 15,500 area needs to hold or this leader may be the first to fail. The head and shoulders looking pattern is not great but there's no real immediate reason why it should fail, so if it does, it will be telling us something we don't already know.
Tomorrow and Thursday we will get the PPI and CPI reports. Both are key indications of inflation. Right now the Fed is starting to focus more on the weakening labor market and that has shifted their stance on rates to a more dovish outlook, but if inflation pops its head in there again, that could change so these reports are important.
The DWCPF* (S-fund) started slowly on Monday but it finished strong and outperformed the S&P 500 again.
* There is a bad quote that occurred on DWCPF on September 3rd of 20,000 and it has distorted the chart, so until they fix that, this chart will be a 5-minute chart spanning just a few days.
ACWX (I-fund) led the way and the ascending channel continues to hold, but a modest double top is being tested.
BND (bonds / F-fund) rallied again as yields continue to slide lower. Will the PPI and CPI inflation data cause that open gap to get retested this week?
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 may use additional methods and strategies to determine fund positions.
With yields continuing to fall and a Federal Reserve now ready to cut interest rates, stocks rallied yesterday, and the small caps are continuing to outperform the large caps. The S&P 500 gained back some of Friday's losses and the chart has some short-term concerns, but the Nasdaq closed at a new all time high, and that's tough to argue with. The dollar was down keeping the I-fund hot and it too is near its all time highs.
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Despite a litany of reasons why stocks should be coming down and many calls for a crash, the stock market has remained resilient, and has continued to trend higher with few signs of slowing down. The bullish arguments have actually been getting stronger with interest rates and tax rates coming down, and earnings moving up, but a market that has not experienced a 3% pullback in five months does feel frothy.
Now that interest rates are almost certainly coming down, is it possible that we will experience some kind of sell the news reaction next week when the Fed does cut? Or are there really investors waiting to see the cuts before they start buying, because investor sentiment is still underwhelming considering the bullish charts and setup, which look very promising.
Source: https://www.cnn.com/markets/fear-and-greed
Admittedly, I have been one of those calling for a pullback because, well just because 5% and 10% pullbacks are not uncommon, it's been a while, and we've been in the most bearish part of the calendar for stocks, but so far I've been wrong to hold as much cash as I have.
The 10-year Treasury Yield continues to slide lower. The chart looked like it wanted to go lower, and it did. A technical analyst can't ask for much more than that. It has been telling us, not only that the Fed may be cutting rates, but that they may have fallen behind.
The S&P 500 / C-fund, and even more so, the small caps, like lower interest rates, and this chart has shown investors have been anticipating them. Could this rollover and break below support? Of course, but it hasn't yet, and as I mentioned above, the test may come after the Fed does start to cut rates to see if there is a sell the news reaction, or if the surprisingly elevated percentage of bears out there will give up and start buying and propel the indices to another leg higher in the 4th quarter.
The Nasdaq did make a new closing high yesterday. Again, this could be stalling near the previous highs, but there's no sign yet that investors are done. It could change quickly, but it hasn't yet.
The market leading, economically sensitive Dow Transportation Index is showing some sign of fatigue and it may be just one of several question marks that may be keeping some people away. The 15,500 area needs to hold or this leader may be the first to fail. The head and shoulders looking pattern is not great but there's no real immediate reason why it should fail, so if it does, it will be telling us something we don't already know.
Tomorrow and Thursday we will get the PPI and CPI reports. Both are key indications of inflation. Right now the Fed is starting to focus more on the weakening labor market and that has shifted their stance on rates to a more dovish outlook, but if inflation pops its head in there again, that could change so these reports are important.
The DWCPF* (S-fund) started slowly on Monday but it finished strong and outperformed the S&P 500 again.
* There is a bad quote that occurred on DWCPF on September 3rd of 20,000 and it has distorted the chart, so until they fix that, this chart will be a 5-minute chart spanning just a few days.
ACWX (I-fund) led the way and the ascending channel continues to hold, but a modest double top is being tested.
BND (bonds / F-fund) rallied again as yields continue to slide lower. Will the PPI and CPI inflation data cause that open gap to get retested this week?
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
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 may use additional methods and strategies to determine fund positions.
