08/06/25
Stocks opened higher on Tuesday but the sellers took control just as soon as Friday's open gap was filled. There wasn't a whole lot of news although a weaker than expected ISM Services report seemed to have a negative impact at 10 AM ET. Bond Yields also reversed lower after that report was released. Earnings continue to roll in with AMD reporting last night, and earnings are obviously the key to market valuations, but all eyes are on the chances of an interest rate cut in September.
(The most current commentary is always posted here: www.tsptalk.com/comments.php)
The probability of a Fed interest rate cut at the September meeting is near 90% according to the CME group. However, the CEO of Bank of America was on CNBC yesterday saying his economic team doesn't see any interest rate cuts until 2026. The good news is they see little chances of a recession, which is why they think there is no need to cut, but how disappointed will the market be if there are no cuts through the end of the year?
Throw in the ever changing tariff situation in there and investors may be having a difficult time putting a valuation on stocks, which are already fairly highly priced basic on historic valuations.
Yet we see a stock like Palantir, which had more than doubled since the early April low through Monday, jump another 8% yesterday. Is this the blow off top?
Whether the AI or semiconductor stocks can keep the market rallying may be the answer regarding how much of a pullback we get over the next several weeks. AMD, one of the major semiconductor companies, was down sharply after reporting earnings last night. Nvidia doesn't report earnings until August 27.
Looking at the small caps, this chart may be trying to tell us that the worst is over, at least for the small caps, as the 50-day EMA was tested and held last week. Obviously if it rolls over again and breaks below that average, all bets are off because support gets very thin below that area. But yesterday, it was up nicely, and that helped the S-fund to a much more modest loss than the S&P 500 / C-fund.
The S&P 500 (C-fund) never even tested its 50-day average, at least not yet. Yesterday's morning rally filled in Friday's open gap, but the index rolled over again trying to hang onto that green 20-day average - and the bottom of that filled gap. Technically Monday's gap (red box) would not be completely filled until it retests Friday's closing price. There are plenty of support areas below that could be potential pullback targets, but looking at the small caps above, there is a chance that Fridays lows could hold.
I'm not so sure and I'm still being careful. That negative outside reversal day hasn't worked its way out of the technical picture yet. However, if we can get another 80% to 90% up volume day this week, that could change my skepticism because that would be a very bullish signal. Until then, the chart has a little work to do.
The Dow Transportation Index, which is not part of the TSP directly, but it is a market leader so we pay attention to what it is doing. Yesterday it rallied nicely but it stalled at the 50-day EMA, which is acting as resistance. The lows on Friday did fill an old open gap (blue) but we still have that larger gap open down near 14,250, which could also be a target if the immediate support breaks.
As investors consider the impact of last Friday's weak jobs data, they also realize that it may have pushed the Fed closer to the first interest rate cut of the year. However, not everyone agrees with that analysis, as we mentioned above, and throw in the feud between Trump and Fed Chair Powell, and I don't think anything is a certainty, despite that 90% probability of being priced in.
The DWCPF / S-fund broke below key support last Friday but it has since checked a few boxes in the recent trading after successfully testing the 50-day EMA, and then filling in Friday's open gap yesterday. It could easily fail here at that old support, but if we take the cues from the Russell 2000, it would be tough to dismiss another possible "V" bottom here. 2350 - 2360 are the key levels to watch.
ACWX (I-fund) closed with a gain yesterday and this "V" bottom is still intact. There are plenty of small open gaps above, and one big one below (red box), with some resistance near 61.30 and 62, so how this reacts to that resistance will be the tell if it's ready to come back and retest the old highs or not.
BND (bonds / F-fund) closed at a new high for the year yesterday as the recent weaker than expected economic data sends yields lower. It is building up some support above those breakout areas, but the open gap near 73.10 is still in play as a possible pullback area.
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 opened higher on Tuesday but the sellers took control just as soon as Friday's open gap was filled. There wasn't a whole lot of news although a weaker than expected ISM Services report seemed to have a negative impact at 10 AM ET. Bond Yields also reversed lower after that report was released. Earnings continue to roll in with AMD reporting last night, and earnings are obviously the key to market valuations, but all eyes are on the chances of an interest rate cut in September.
(The most current commentary is always posted here: www.tsptalk.com/comments.php)
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The probability of a Fed interest rate cut at the September meeting is near 90% according to the CME group. However, the CEO of Bank of America was on CNBC yesterday saying his economic team doesn't see any interest rate cuts until 2026. The good news is they see little chances of a recession, which is why they think there is no need to cut, but how disappointed will the market be if there are no cuts through the end of the year?
Throw in the ever changing tariff situation in there and investors may be having a difficult time putting a valuation on stocks, which are already fairly highly priced basic on historic valuations.
Yet we see a stock like Palantir, which had more than doubled since the early April low through Monday, jump another 8% yesterday. Is this the blow off top?
Whether the AI or semiconductor stocks can keep the market rallying may be the answer regarding how much of a pullback we get over the next several weeks. AMD, one of the major semiconductor companies, was down sharply after reporting earnings last night. Nvidia doesn't report earnings until August 27.
Looking at the small caps, this chart may be trying to tell us that the worst is over, at least for the small caps, as the 50-day EMA was tested and held last week. Obviously if it rolls over again and breaks below that average, all bets are off because support gets very thin below that area. But yesterday, it was up nicely, and that helped the S-fund to a much more modest loss than the S&P 500 / C-fund.
The S&P 500 (C-fund) never even tested its 50-day average, at least not yet. Yesterday's morning rally filled in Friday's open gap, but the index rolled over again trying to hang onto that green 20-day average - and the bottom of that filled gap. Technically Monday's gap (red box) would not be completely filled until it retests Friday's closing price. There are plenty of support areas below that could be potential pullback targets, but looking at the small caps above, there is a chance that Fridays lows could hold.
I'm not so sure and I'm still being careful. That negative outside reversal day hasn't worked its way out of the technical picture yet. However, if we can get another 80% to 90% up volume day this week, that could change my skepticism because that would be a very bullish signal. Until then, the chart has a little work to do.
The Dow Transportation Index, which is not part of the TSP directly, but it is a market leader so we pay attention to what it is doing. Yesterday it rallied nicely but it stalled at the 50-day EMA, which is acting as resistance. The lows on Friday did fill an old open gap (blue) but we still have that larger gap open down near 14,250, which could also be a target if the immediate support breaks.
As investors consider the impact of last Friday's weak jobs data, they also realize that it may have pushed the Fed closer to the first interest rate cut of the year. However, not everyone agrees with that analysis, as we mentioned above, and throw in the feud between Trump and Fed Chair Powell, and I don't think anything is a certainty, despite that 90% probability of being priced in.
The DWCPF / S-fund broke below key support last Friday but it has since checked a few boxes in the recent trading after successfully testing the 50-day EMA, and then filling in Friday's open gap yesterday. It could easily fail here at that old support, but if we take the cues from the Russell 2000, it would be tough to dismiss another possible "V" bottom here. 2350 - 2360 are the key levels to watch.
ACWX (I-fund) closed with a gain yesterday and this "V" bottom is still intact. There are plenty of small open gaps above, and one big one below (red box), with some resistance near 61.30 and 62, so how this reacts to that resistance will be the tell if it's ready to come back and retest the old highs or not.
BND (bonds / F-fund) closed at a new high for the year yesterday as the recent weaker than expected economic data sends yields lower. It is building up some support above those breakout areas, but the open gap near 73.10 is still in play as a possible pullback area.
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.
