08/21/25
Was that it? Despite the losses yesterday, it may have been a positive reversal day - or it was just filling in the morning open gap. If we go by the recent action, that may have been the pullback, as support held right where it was supposed to. However, there are still some cracks showing, and stocks are clearly overvalued by any historical measures. The question is whether now is the time to flush out those extreme readings or will we get another leg higher first?
(The most current commentary is always posted here: www.tsptalk.com/comments.php)
With the Fed on deck with the 3-day Jackson Hole Economic Policy Symposium starting today, I suppose we could see many possibilities. If yesterday's reversal fails and we retrace the lows, then stocks could be in some trouble, but there's no doubt that yesterday's action was more bullish than bearish from a traditional sense of a positive reversal day.
The market breadth, advancing vs. declining stocks, was slightly negative but there were 141 new 52-week lows on the Nasdaq yesterday vs. just 81 new highs. That's with the Nasdaq 42% above its 2025 lows, and less than 3% off its all time highs. Very odd, but the positive reversal could change that ratio today.
The market has been relying on the biggest tech stocks to keep the big three market indices moving up. Right now the top 10 companies in the S&P 500 make up nearly 40% of the index, and that is by far the largest concentration of value in a long time, if not ever.
One of those top 10 companies, Palantir, the best performing stock in the S&P 500 this year by quite a bit, has now been down for 6 straight days but yesterday it also had a big positive reversal day, holding in all the right support areas so far. Again I ask, is that it? When something drops that precipitously it usually doesn't just come running back. If you jump off a counter top, you may stumble, but you're likely fine and can quickly go on your way. But if you jump off a roof, it may be a while before you're able run again. It wasn't devastating, but that was a 25% decline in six days so we'll see if this can give us anything more than just a dead-cat bounce. The 170 area could present some resistance.
Nvidia, another one of the Nasdaq leaders, didn't fall as far, but it did break two support levels which it may or may not recapture right away. Again, it was a great reversal and we could see some follow through on the upside today, but declines like that don't usually mean nothing.
The S&P 500 (C-fund) was down sharply early on Wednesday but it hit a confluence of support and easily bounced back. It did not close in positive territory, but it was impressive none the less. There is a lot that looks good here on the chart after that reversal, except for maybe that PMO indicator, which had been warning us of some kind of weakness coming up.
What did the market leading Dow Transportation Index do yesterday? Nothing good. Not only did it lose all of this week's gains yesterday, but it did not reverse like the other indices, it closed near the lows of the day, and it is sitting near some key support.
With the Fed still expected to cut interest rates in September, the market could get blindsided as they actually sounds more divided on the subject in the meeting minutes released yesterday. A stronger than expected economy so far, plus tariffs and their potential for inflation are the reasons to keep interest rates where they are. On the other side the weakening labor market and housing market may be a reason to cut. Let's see if we get any clues today.
The DWCPF / S-fund closed down on Wednesday, but near its highs of the day after a positive reversal. Technically it would have been better for it to close positive for the day, but the reversal was so big, like others circled in green below, that there should be some bullish follow through, at least early today. If the market is turning bearish, yesterday's reversal -- will get reversed.
ACWX (I-fund) managed another gain keeping it right near its all time highs. The dollar was down slightly, helping it, but the question for me has been whether the action over the last several weeks in UUP has been bottoming action. Watch that red line on UUP, or the neckline of the inverted head and shoulders pattern.
BND (bonds / F-fund) was up modestly again yesterday as yields slipped slightly lower. It seems to trying to create a bullish flag above the April peak.
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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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.
Was that it? Despite the losses yesterday, it may have been a positive reversal day - or it was just filling in the morning open gap. If we go by the recent action, that may have been the pullback, as support held right where it was supposed to. However, there are still some cracks showing, and stocks are clearly overvalued by any historical measures. The question is whether now is the time to flush out those extreme readings or will we get another leg higher first?
(The most current commentary is always posted here: www.tsptalk.com/comments.php)
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With the Fed on deck with the 3-day Jackson Hole Economic Policy Symposium starting today, I suppose we could see many possibilities. If yesterday's reversal fails and we retrace the lows, then stocks could be in some trouble, but there's no doubt that yesterday's action was more bullish than bearish from a traditional sense of a positive reversal day.
The market breadth, advancing vs. declining stocks, was slightly negative but there were 141 new 52-week lows on the Nasdaq yesterday vs. just 81 new highs. That's with the Nasdaq 42% above its 2025 lows, and less than 3% off its all time highs. Very odd, but the positive reversal could change that ratio today.
The market has been relying on the biggest tech stocks to keep the big three market indices moving up. Right now the top 10 companies in the S&P 500 make up nearly 40% of the index, and that is by far the largest concentration of value in a long time, if not ever.
One of those top 10 companies, Palantir, the best performing stock in the S&P 500 this year by quite a bit, has now been down for 6 straight days but yesterday it also had a big positive reversal day, holding in all the right support areas so far. Again I ask, is that it? When something drops that precipitously it usually doesn't just come running back. If you jump off a counter top, you may stumble, but you're likely fine and can quickly go on your way. But if you jump off a roof, it may be a while before you're able run again. It wasn't devastating, but that was a 25% decline in six days so we'll see if this can give us anything more than just a dead-cat bounce. The 170 area could present some resistance.
Nvidia, another one of the Nasdaq leaders, didn't fall as far, but it did break two support levels which it may or may not recapture right away. Again, it was a great reversal and we could see some follow through on the upside today, but declines like that don't usually mean nothing.
The S&P 500 (C-fund) was down sharply early on Wednesday but it hit a confluence of support and easily bounced back. It did not close in positive territory, but it was impressive none the less. There is a lot that looks good here on the chart after that reversal, except for maybe that PMO indicator, which had been warning us of some kind of weakness coming up.
What did the market leading Dow Transportation Index do yesterday? Nothing good. Not only did it lose all of this week's gains yesterday, but it did not reverse like the other indices, it closed near the lows of the day, and it is sitting near some key support.
With the Fed still expected to cut interest rates in September, the market could get blindsided as they actually sounds more divided on the subject in the meeting minutes released yesterday. A stronger than expected economy so far, plus tariffs and their potential for inflation are the reasons to keep interest rates where they are. On the other side the weakening labor market and housing market may be a reason to cut. Let's see if we get any clues today.
The DWCPF / S-fund closed down on Wednesday, but near its highs of the day after a positive reversal. Technically it would have been better for it to close positive for the day, but the reversal was so big, like others circled in green below, that there should be some bullish follow through, at least early today. If the market is turning bearish, yesterday's reversal -- will get reversed.
ACWX (I-fund) managed another gain keeping it right near its all time highs. The dollar was down slightly, helping it, but the question for me has been whether the action over the last several weeks in UUP has been bottoming action. Watch that red line on UUP, or the neckline of the inverted head and shoulders pattern.
BND (bonds / F-fund) was up modestly again yesterday as yields slipped slightly lower. It seems to trying to create a bullish flag above the April peak.
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.
