07/07/25
Stocks rallied before the long holiday weekend, and since that early market close on Thursday, the spending bill passed and was signed into law. The futures were down moderately on Sunday evening so we may be seeing a sell the news reaction. We didn't see much in the "pre-holiday" reversal camp with three up days out of four last week, so the bullish seasonality before July 4th held true. This week also has a bullish bias but the market is getting stretched so the battle begins.
(The most current commentary is always posted here: www.tsptalk.com/comments.php)
After a much weaker than expected ADP jobs report on Wednesday, the June nonfarm jobs report on Thursday beat estimates by 20K - 30K jobs, depending on the estimates, and the unemployment rate surprisingly dropped to 4.1%, but that was mostly due to the participation rate declining - meaning some people are now considered to be no longer looking for work so they fell off the unemployment list.
We actually had some positive revisions to prior reports for a change with the May nonfarm payrolls revised to 144,000 from 139,000 and April payrolls moving to +158,000 from 147,000.
The bad news (I guess it's bad?) is that the report all but guarantees no rate cut by the Fed at the July FOMC meet. The current odds are less than 5%.
The strong economic data did push yields higher, and the 10-year Treasury Yield is now up testing the bottom of the channel it broke below in June, and the 50-day EMA, so there is some resistance here at 4.35%. It did move, and close, above the 200-day EMA, however.
The S&P 500 was up 5.50% at the end of June (30th.) When the S&P 500 is up between 5-10% for the year at the midpoint the final six months were higher 13 out of 15 times and the full year was up 14 out of 15 times.
That 5.5% gain sounds modest but don't forget that was coming off 20% decline earlier in the year, so it has come a long way since that low in April and as good as the charts look, and as much as the bulls are currently in charge, the indices are extended and overbought so they are getting vulnerable.
The S&P 500 (C-fund) is making new highs almost daily since breaking out above the February highs on June 27. The blue trading channel is rising, the moving averages are rising, the PMO indicator is rising, and investor sentiment is rising, but sometimes when everything looks great and everyone is getting bullish, you have to start to consider that we're due for some backing and filling.
It wouldn't be a surprise if the momentum kept up for a while, especially with July's strong record over the years. In a perfect world stocks would follow the seasonality chart and make life easier for us and hold on until late July when seasonality gets much less bullish, and that bearishness rolls into August and September.
Only November has a better average return than July since 2010, while August and September have had their problems.
Despite all of the ducks lining up in a row for the bulls, the bullish catalyst of the last few months of rising liquidity will dry up soon and the market will no longer have that advantage. That alone could be a reason for stocks to pause. But with taxes going down, interest rates eventually coming down, regulation being eased, any pause or pullback in stocks this year probably won't be severe. I heard Tom Lee of FundStrat say that anytime the market is down 20% during the year and bounces back, the chances of another 10% correction by the end of the year are near zero. But we could see something in 3 to 5% range easily. Is it worth trying to time that?
We do have a light schedule of economic data this week, but we will face any reaction to the passing of the Big, Beautiful Bill, and then the tariff deadline, which was scheduled for July 9, seems to have extended to August 1 according to Treasury Secretary Scott Bessent. The futures on Sunday evening were down.
DWCPF / S-fund is breaking out. The chart is looking good but is it finally ready to take the lead, or is this another case of fool me once, or in this case, fool me again? Lower interest rates would help the small caps situation but there's no sign of that just yet.
The ACWX (I-fund) was up on Friday but it lagged the US funds because of some strength in the dollar.
You can see that UUP is testing the double bottom low that it fell through in late June.
BND (bonds / F-fund) looked to be creating a pre-holiday reversal last week as we saw a pullback from the bullish rally. Typically following a pre-holiday reversal, the larger trend would would resume this week. It is still quite a bit above its 50-dy average so there is room for more downside, but the top of that channel could attempt to hold as support near 73.
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 rallied before the long holiday weekend, and since that early market close on Thursday, the spending bill passed and was signed into law. The futures were down moderately on Sunday evening so we may be seeing a sell the news reaction. We didn't see much in the "pre-holiday" reversal camp with three up days out of four last week, so the bullish seasonality before July 4th held true. This week also has a bullish bias but the market is getting stretched so the battle begins.
(The most current commentary is always posted here: www.tsptalk.com/comments.php)
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After a much weaker than expected ADP jobs report on Wednesday, the June nonfarm jobs report on Thursday beat estimates by 20K - 30K jobs, depending on the estimates, and the unemployment rate surprisingly dropped to 4.1%, but that was mostly due to the participation rate declining - meaning some people are now considered to be no longer looking for work so they fell off the unemployment list.
We actually had some positive revisions to prior reports for a change with the May nonfarm payrolls revised to 144,000 from 139,000 and April payrolls moving to +158,000 from 147,000.
The bad news (I guess it's bad?) is that the report all but guarantees no rate cut by the Fed at the July FOMC meet. The current odds are less than 5%.
The strong economic data did push yields higher, and the 10-year Treasury Yield is now up testing the bottom of the channel it broke below in June, and the 50-day EMA, so there is some resistance here at 4.35%. It did move, and close, above the 200-day EMA, however.
The S&P 500 was up 5.50% at the end of June (30th.) When the S&P 500 is up between 5-10% for the year at the midpoint the final six months were higher 13 out of 15 times and the full year was up 14 out of 15 times.
That 5.5% gain sounds modest but don't forget that was coming off 20% decline earlier in the year, so it has come a long way since that low in April and as good as the charts look, and as much as the bulls are currently in charge, the indices are extended and overbought so they are getting vulnerable.
The S&P 500 (C-fund) is making new highs almost daily since breaking out above the February highs on June 27. The blue trading channel is rising, the moving averages are rising, the PMO indicator is rising, and investor sentiment is rising, but sometimes when everything looks great and everyone is getting bullish, you have to start to consider that we're due for some backing and filling.
It wouldn't be a surprise if the momentum kept up for a while, especially with July's strong record over the years. In a perfect world stocks would follow the seasonality chart and make life easier for us and hold on until late July when seasonality gets much less bullish, and that bearishness rolls into August and September.
Only November has a better average return than July since 2010, while August and September have had their problems.
Despite all of the ducks lining up in a row for the bulls, the bullish catalyst of the last few months of rising liquidity will dry up soon and the market will no longer have that advantage. That alone could be a reason for stocks to pause. But with taxes going down, interest rates eventually coming down, regulation being eased, any pause or pullback in stocks this year probably won't be severe. I heard Tom Lee of FundStrat say that anytime the market is down 20% during the year and bounces back, the chances of another 10% correction by the end of the year are near zero. But we could see something in 3 to 5% range easily. Is it worth trying to time that?
We do have a light schedule of economic data this week, but we will face any reaction to the passing of the Big, Beautiful Bill, and then the tariff deadline, which was scheduled for July 9, seems to have extended to August 1 according to Treasury Secretary Scott Bessent. The futures on Sunday evening were down.
DWCPF / S-fund is breaking out. The chart is looking good but is it finally ready to take the lead, or is this another case of fool me once, or in this case, fool me again? Lower interest rates would help the small caps situation but there's no sign of that just yet.
The ACWX (I-fund) was up on Friday but it lagged the US funds because of some strength in the dollar.
You can see that UUP is testing the double bottom low that it fell through in late June.
BND (bonds / F-fund) looked to be creating a pre-holiday reversal last week as we saw a pullback from the bullish rally. Typically following a pre-holiday reversal, the larger trend would would resume this week. It is still quite a bit above its 50-dy average so there is room for more downside, but the top of that channel could attempt to hold as support near 73.
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.
Like what you're seeing on TSP Talk? Why not Tell a Friend about us? We'd really appreciate it, and they may too.
Thanks!
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.
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