10/21/25
Stocks gapped up on Monday morning and held, and tacked onto the gains throughout the day. Being that the pullback low was over a week ago, investors may be feeling more comfortable that the worst is over as the indices are back testing the recent highs. Yields were down and the 10-year yield is below 4% again, the dollar was up, and the price of oil is testing the 2025 lows.
The market breadth was impressive with the NYSE issues more than 4 to 1 in favor of advancing stocks, and the Nasdaq was about 3.5 to 1.
The S&P 500 (C-fund) is back testing its recent highs after a serious one day decline with a retest of the lows that held at key support levels. It is still volatile October and if the consolidation is going to continue we could see some short term choppiness in the days ahead. The gap opened yesterday near 6670 is up for grabs if the bulls can't keep it going, but overall this looks very productive. Whether modest or serious, I'd be willing to buy weakness and gaps fills.
Why? There is a lot of ducks lining up for the bull market.
Not only have interest rates started coming down and the Fed will likely cut again next week, but look at this probability chart for next year - the October 2026 meeting:
It shows the bulk of estimates for the Fed Funds rate being between 2.50% and 3.00%, which would be 4 to 6 more 0.25% cuts from where it is now. Of course we came into 2025 expecting potentially 6 cuts but they didn't start until last month.
Earnings are doing well and estimates continue to rise. Yes, stock valuations are high but that won't likely change until this market has another refresh moment, and with rates coming down, the Fed ending its quantitative tightening program, tax rates being lowered, I don't see that coming in the near future. Maybe some time in 2026, I don't know, but even seasonality is heating up so for the next couple of months, these earnings help the breeze at the backs on the bulls.
The price of oil is falling. Oil can spike and dive with geological events and as we see in the top chart below, but it has been trending lower all year. This is an addition "tax break" for consumers as gas prices continue to come down.
It is now about half the price of the post-COVID peak, which of course was triggered by a huge economic stimulus, and right now investors are actually worried about economic growth and that's where the Fed comes in, and it's a good combo to help the economy - lower gas prices while the Fed is cutting rates.
The Transportation Index had another good day yesterday, closing above that 50-day average for a 3rd straight day, but it is still struggling at that overhead resistance.
There are some economic reports on the calendar, but with the government shut down, I'm not sure which will actually be released this week.
DWCPF Index (S-Fund) gapped up and other than the risk of seeing that gap get filled, the bulls remain in control as long as this remains above that purple 50-day average. A breakout to new highs that actually holds would be the confirmation.
ACWX (I-fund) kept pace with the S&P 500 despite a 0.25% rally in the dollar yesterday. It closed at a new high. I keep saying that US stocks would outperform the I-fund if the dollar keeps rallying, but so far the I-fund has done a great job of remaining resilient -- and proving me wrong about that.
BND (bonds / F-fund) was up and is testing Thursday's high as it closes yet again above the upper resistance lines. The 10-year yield did fall below 4% again.
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.
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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.
Stocks gapped up on Monday morning and held, and tacked onto the gains throughout the day. Being that the pullback low was over a week ago, investors may be feeling more comfortable that the worst is over as the indices are back testing the recent highs. Yields were down and the 10-year yield is below 4% again, the dollar was up, and the price of oil is testing the 2025 lows.
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The market breadth was impressive with the NYSE issues more than 4 to 1 in favor of advancing stocks, and the Nasdaq was about 3.5 to 1.
The S&P 500 (C-fund) is back testing its recent highs after a serious one day decline with a retest of the lows that held at key support levels. It is still volatile October and if the consolidation is going to continue we could see some short term choppiness in the days ahead. The gap opened yesterday near 6670 is up for grabs if the bulls can't keep it going, but overall this looks very productive. Whether modest or serious, I'd be willing to buy weakness and gaps fills.
Why? There is a lot of ducks lining up for the bull market.
Not only have interest rates started coming down and the Fed will likely cut again next week, but look at this probability chart for next year - the October 2026 meeting:
It shows the bulk of estimates for the Fed Funds rate being between 2.50% and 3.00%, which would be 4 to 6 more 0.25% cuts from where it is now. Of course we came into 2025 expecting potentially 6 cuts but they didn't start until last month.
Earnings are doing well and estimates continue to rise. Yes, stock valuations are high but that won't likely change until this market has another refresh moment, and with rates coming down, the Fed ending its quantitative tightening program, tax rates being lowered, I don't see that coming in the near future. Maybe some time in 2026, I don't know, but even seasonality is heating up so for the next couple of months, these earnings help the breeze at the backs on the bulls.
The price of oil is falling. Oil can spike and dive with geological events and as we see in the top chart below, but it has been trending lower all year. This is an addition "tax break" for consumers as gas prices continue to come down.
It is now about half the price of the post-COVID peak, which of course was triggered by a huge economic stimulus, and right now investors are actually worried about economic growth and that's where the Fed comes in, and it's a good combo to help the economy - lower gas prices while the Fed is cutting rates.
The Transportation Index had another good day yesterday, closing above that 50-day average for a 3rd straight day, but it is still struggling at that overhead resistance.
There are some economic reports on the calendar, but with the government shut down, I'm not sure which will actually be released this week.
DWCPF Index (S-Fund) gapped up and other than the risk of seeing that gap get filled, the bulls remain in control as long as this remains above that purple 50-day average. A breakout to new highs that actually holds would be the confirmation.
ACWX (I-fund) kept pace with the S&P 500 despite a 0.25% rally in the dollar yesterday. It closed at a new high. I keep saying that US stocks would outperform the I-fund if the dollar keeps rallying, but so far the I-fund has done a great job of remaining resilient -- and proving me wrong about that.
BND (bonds / F-fund) was up and is testing Thursday's high as it closes yet again above the upper resistance lines. The 10-year yield did fall below 4% again.
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.
