10/30/25
The S&P 500 and Nasdaq both made another new high yesterday before the Fed cut interest rates by 0.25%, but once again the number of stocks that were down easily outpaced the number that were up, and that was thanks to Fed Chair Powell who made one statement that sent most stocks reeling yesterday afternoon. The volatile action did do some positive patching to several charts, but the uncertainty did give the smaller indices trouble again.
Yesterday Powell reiterated that there is no risk free path to rate changes as he is still concerned about the sticky inflation, but he also sees a deterioration in the labor market which suggests economic weakness. Ironically Powell said the economy is strengthening more than they had anticipated, which adds to the argument to not cut rates again.
His key statement that shook up the market was that a rate cut in December is far from a foregone conclusion. It's a tough situation, but that emphatic statement about not being a foregone conclusion seemed a little over the top, and could probably been translated into the Fed being data dependent, as always.
While the S&P 500 and Nasdaq large caps didn't get too hurt, although they did give up some gains, small caps gave away a large gain and it turned into a moderate loss.
With the cut however, the market has some a wind at its back as JP Morgan reminded us yesterday that, "...today will be the fifth time that the Fed cuts rates with the S&P 500 at all-time highs. All prior instances the S&P 500 was higher a year later with an average return of 20%. The worst one-year return was a 15% gain which occurred last year."
The odds of a 0.25% cut in December have dropped from 92% a week ago, to 68% yesterday. If you were a gambler, with these odds you would still expect a cut, but perhaps the market won't be pricing it in as aggressively.
As usual, the Fed shook up the markets in the short-term and those comments from Powell sent yields and the dollar higher, which added some pressure to the S, I, and F funds. The 10-year Treasury Yield is now 4.06% and that is not troublesome at all, but again, lets see if it can stabilize rather start shooting higher. Resistance is just overhead.
The dollar finally did breakout above the resistance of that red 200-day average.
The S&P 500 (C-fund) chart still looks fine. Had it close down below Tuesday's low that would have been a negative outside reversal day, a very bearish sign, but it did claw its was back to avoid that and nearly created a positive outside reversal day. This is a bullish chart. The only thing wrong with it is it is at resistance and there's a lot of room on the downside in the short-term.
As I mentioned yesterday, the S&P 500 had been down 4 of last 7 Fed FOMC rate decision days, and yesterday it was flat (down 30 cents.) The day after the FOMC decision days gained an average of +0.18% the day after, with 4 up, down 3.
The large cap tech stocks continue to rip the S&P 500 and Nasdaq higher, but the S&P 500 Equal Weighted Index has been lagging the S&P 500 at a faster pace than anytime in a while - if not ever. For those who may not know, the S&P 500 Equal Weighted Index contains the same 500 stocks as the S&P 500, but the larger companies are not weighted more heavily as they are in the S&P 500. Luckily our C-fund is the S&P 500 so it has been getting the benefit of the top heavy index, but this shows how far behind the average stock is getting in comparison as the ratio between the two widens.
The lower this goes, the stronger the S&P 500 is compared to the Equal Weighted version. A broadening rally would see this chart move higher.
I decided to look at the ratio of the S-fund and the I-fund indices compared to the S&P 500. The S-fund has actually outperformed the S&P 500 since the April lows, but more recently that has been fading again.
But the I-fund continues to outperform the S&P 500, despite the large cap tech advantage.
Speaking of large cap tech, Microsoft, Meta, and Alphabet all reported earnings last night after the closing bell. Alphabet was up strongly while Meta and Microsoft were trading sharply lower. Apple and Amazon report today after the close.
We'll get the key inflation PCE Prices Personal Spending data tomorrow. I wonder if the Fed had these numbers already?
There are certainly concerns in the air, as well as historically bullish set ups. Something is going to have to give. Will the bears wait until next year, or will they try, yes they can only try, to push stocks down during the strongest two months of the year?
The DWCPF Index (S-Fund) pulled back after giving up an early gain after Powell's press conference. If we want to look at the glass half full, yesterday's action may have done it a favor and filled that open gap, tested the bottom of the channel, then close off the lows. It won't mean anything if it continues to fall but as of now, the chart is very much intact.
ACWX (I-fund) was down moderately after giving up its big early gains, and that may have created one of those negative outside reversal days. Why would this one be more important than the reversals in the other TSP fund stock charts? Because of that breakout in the dollar (UUP.) But it did close above the gap after filling it, so I won't count it out yet.
BND (bonds / F-fund) was down sharply with yields spiking higher on the Fed comments. You can see that it is testing a double dose of support so it needs to hold here.
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 use additional methods and strategies to determine fund positions.
The S&P 500 and Nasdaq both made another new high yesterday before the Fed cut interest rates by 0.25%, but once again the number of stocks that were down easily outpaced the number that were up, and that was thanks to Fed Chair Powell who made one statement that sent most stocks reeling yesterday afternoon. The volatile action did do some positive patching to several charts, but the uncertainty did give the smaller indices trouble again.
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Yesterday Powell reiterated that there is no risk free path to rate changes as he is still concerned about the sticky inflation, but he also sees a deterioration in the labor market which suggests economic weakness. Ironically Powell said the economy is strengthening more than they had anticipated, which adds to the argument to not cut rates again.
His key statement that shook up the market was that a rate cut in December is far from a foregone conclusion. It's a tough situation, but that emphatic statement about not being a foregone conclusion seemed a little over the top, and could probably been translated into the Fed being data dependent, as always.
While the S&P 500 and Nasdaq large caps didn't get too hurt, although they did give up some gains, small caps gave away a large gain and it turned into a moderate loss.
With the cut however, the market has some a wind at its back as JP Morgan reminded us yesterday that, "...today will be the fifth time that the Fed cuts rates with the S&P 500 at all-time highs. All prior instances the S&P 500 was higher a year later with an average return of 20%. The worst one-year return was a 15% gain which occurred last year."
The odds of a 0.25% cut in December have dropped from 92% a week ago, to 68% yesterday. If you were a gambler, with these odds you would still expect a cut, but perhaps the market won't be pricing it in as aggressively.
As usual, the Fed shook up the markets in the short-term and those comments from Powell sent yields and the dollar higher, which added some pressure to the S, I, and F funds. The 10-year Treasury Yield is now 4.06% and that is not troublesome at all, but again, lets see if it can stabilize rather start shooting higher. Resistance is just overhead.
The dollar finally did breakout above the resistance of that red 200-day average.
The S&P 500 (C-fund) chart still looks fine. Had it close down below Tuesday's low that would have been a negative outside reversal day, a very bearish sign, but it did claw its was back to avoid that and nearly created a positive outside reversal day. This is a bullish chart. The only thing wrong with it is it is at resistance and there's a lot of room on the downside in the short-term.
As I mentioned yesterday, the S&P 500 had been down 4 of last 7 Fed FOMC rate decision days, and yesterday it was flat (down 30 cents.) The day after the FOMC decision days gained an average of +0.18% the day after, with 4 up, down 3.
The large cap tech stocks continue to rip the S&P 500 and Nasdaq higher, but the S&P 500 Equal Weighted Index has been lagging the S&P 500 at a faster pace than anytime in a while - if not ever. For those who may not know, the S&P 500 Equal Weighted Index contains the same 500 stocks as the S&P 500, but the larger companies are not weighted more heavily as they are in the S&P 500. Luckily our C-fund is the S&P 500 so it has been getting the benefit of the top heavy index, but this shows how far behind the average stock is getting in comparison as the ratio between the two widens.
The lower this goes, the stronger the S&P 500 is compared to the Equal Weighted version. A broadening rally would see this chart move higher.
I decided to look at the ratio of the S-fund and the I-fund indices compared to the S&P 500. The S-fund has actually outperformed the S&P 500 since the April lows, but more recently that has been fading again.
But the I-fund continues to outperform the S&P 500, despite the large cap tech advantage.
Speaking of large cap tech, Microsoft, Meta, and Alphabet all reported earnings last night after the closing bell. Alphabet was up strongly while Meta and Microsoft were trading sharply lower. Apple and Amazon report today after the close.
We'll get the key inflation PCE Prices Personal Spending data tomorrow. I wonder if the Fed had these numbers already?
There are certainly concerns in the air, as well as historically bullish set ups. Something is going to have to give. Will the bears wait until next year, or will they try, yes they can only try, to push stocks down during the strongest two months of the year?
The DWCPF Index (S-Fund) pulled back after giving up an early gain after Powell's press conference. If we want to look at the glass half full, yesterday's action may have done it a favor and filled that open gap, tested the bottom of the channel, then close off the lows. It won't mean anything if it continues to fall but as of now, the chart is very much intact.
ACWX (I-fund) was down moderately after giving up its big early gains, and that may have created one of those negative outside reversal days. Why would this one be more important than the reversals in the other TSP fund stock charts? Because of that breakout in the dollar (UUP.) But it did close above the gap after filling it, so I won't count it out yet.
BND (bonds / F-fund) was down sharply with yields spiking higher on the Fed comments. You can see that it is testing a double dose of support so it needs to hold here.
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 use additional methods and strategies to determine fund positions.
