05/14/26
Stocks struggled at the open yesterday after yet another inflation report came in hotter than expected - the PPI, or Producer Price Index. And while we once again saw more stocks down on the day than up, the big tech rally continued helping the S&P 500 and Nasdaq close at new record highs. Meanwhile the Dow, small caps, and the Transportation Index were all flat or down on the day.
Like the CPI, the PPI data was hotter than expected and we saw yields and the dollar move up again, initially putting pressure on the stock market, but the momentum in tech stocks was too tough to stop, and we saw more new highs.
The price of oil jumped ended the day down just slightly but still closed near $101 a barrel.
Kevin Warsh was confirmed as the next Federal Reserve Chair, and he will start right away. While everyone expects him to cut rates to appease President Trump, the chance of a rate cut this year has almost completely evaporated, and there is now a 35% chance of at least one rate hike before the end of the year - mostly thanks to the inflation data that has been coming in. There is a 64% chance of the Fed Funds rate staying right where it is.
The 10-year Treasury Yield has been telling us this for a while as it carved out a bullish (for yields) cup and handle formation over the last couple of months. It hit 4.5% yesterday, and that's the first time it was at that level in 11 months. Since these formations are bullish, I'd expect this to move higher, although there is a small open gap below that it could revisit in the short-term.
We continue to see weakness under the surface while the large cap indices are making new highs. Combined, there were more stocks down yesterday than up on the NYSE and Nasdaq. While we did see 290 new 52-weeks highs on the Nasdaq yesterday, there were a surprising 230 new 52-week lows. That's a very high number for an index making new highs almost daily.
9% of the S&P 500 (C-fund) made a new 52-week low yesterday while the index made a new all time high. It's happened a few times this year, but 9% yesterday was the most extreme. It doesn't mean stocks are going to collapse, but they could. It does tell us that we are seeing more narrowing of companies that are holding the indices at their highs. When a few of these leaders fail, the market could tumble quick, but earnings have been good and maybe they will, or maybe they won't tumble.
We still have negative divergences in some indicators, and while it hasn't officially triggered yet, we've had three near miss Hindenburg Omen Signals this week.
Yes, I have taken these warnings, and have so for several weeks now, so I have been underperforming the indices recently, although making money since I still have some money in the stock funds and somehow I am still beating the returns of the C and S-funds. I just raised some cash - too soon apparently.
The problem with getting too defensive is that some of these companies that are leading the way, are really not that expensive because their earnings are growing so rapidly.
For example, Nvidia has a forward Price to Earnings (P/E) ratio of 26%. Their earnings are projected to grow 68% in the next year, so that is a reasonably priced company.
Micron, which I have highlighted as being off the charts with their stock price soaring recently, has a forward P/E ratio of just 8%. Their earnings are expected to grow by 34% over the next year.
Again, not over priced at all, but when a chart goes straight up, it tends to have issues when there are any hiccups, even if those hiccups are outside of the company like a geopolitical event, an increase in interest rates, or whatever.
Both may be good investments but perhaps vulnerable, and if these leaders stop holding up the major indices, we may actually notice the damage going on underneath the surface in the stock market.
Look at some of these very familiar names that we are used to seeing as top performers in their industries. I could list dozens like this.
Right now investors may be using the high flying A-I / semiconductor companies as a safety trade. We saw this before when Mag 7 was all the rage. Meanwhile the rest of the stock market may be showing signs of trouble.
Admin Note: I have to go out of town this afternoon so Friday's commentary is questionable at this point. We will make sure all the returns and share prices get updated, but I may not be able to post much except maybe a quick check in for Friday's commentary. My apologies for any inconvenience this may cause.
Additional TSP Fund Charts:
DWCPF (S-fund) was slightly positive yesterday after gaining back a moderate size morning loss. It is still struggling to make new highs like the large caps, but that's actually not a bad thing. Consolidating while forming a base may be a better set up. And how about filling in the gap near 2600 while you're at it? I'm tired of looking at it.
ACWX (I-fund) had a big day - for whatever reason. The dollar wasn't down, oil was flat, and yields were up. Not usually the recipe for a big day in the international markets. The positive reversal day on Monday helped.
BND (bonds / F-fund) is back testing the lower end of that blue trading channel. Can that hold or will the open gap down by 72.60 finally get some attention?
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
Updated monthly:
Questions, comments, or issues with today's commentary? We can discuss it in the Forum.
Daily Market Commentary Archives
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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.
Stocks struggled at the open yesterday after yet another inflation report came in hotter than expected - the PPI, or Producer Price Index. And while we once again saw more stocks down on the day than up, the big tech rally continued helping the S&P 500 and Nasdaq close at new record highs. Meanwhile the Dow, small caps, and the Transportation Index were all flat or down on the day.
| Daily TSP Funds Return More returns |
Like the CPI, the PPI data was hotter than expected and we saw yields and the dollar move up again, initially putting pressure on the stock market, but the momentum in tech stocks was too tough to stop, and we saw more new highs.
The price of oil jumped ended the day down just slightly but still closed near $101 a barrel.
Kevin Warsh was confirmed as the next Federal Reserve Chair, and he will start right away. While everyone expects him to cut rates to appease President Trump, the chance of a rate cut this year has almost completely evaporated, and there is now a 35% chance of at least one rate hike before the end of the year - mostly thanks to the inflation data that has been coming in. There is a 64% chance of the Fed Funds rate staying right where it is.
The 10-year Treasury Yield has been telling us this for a while as it carved out a bullish (for yields) cup and handle formation over the last couple of months. It hit 4.5% yesterday, and that's the first time it was at that level in 11 months. Since these formations are bullish, I'd expect this to move higher, although there is a small open gap below that it could revisit in the short-term.
We continue to see weakness under the surface while the large cap indices are making new highs. Combined, there were more stocks down yesterday than up on the NYSE and Nasdaq. While we did see 290 new 52-weeks highs on the Nasdaq yesterday, there were a surprising 230 new 52-week lows. That's a very high number for an index making new highs almost daily.
9% of the S&P 500 (C-fund) made a new 52-week low yesterday while the index made a new all time high. It's happened a few times this year, but 9% yesterday was the most extreme. It doesn't mean stocks are going to collapse, but they could. It does tell us that we are seeing more narrowing of companies that are holding the indices at their highs. When a few of these leaders fail, the market could tumble quick, but earnings have been good and maybe they will, or maybe they won't tumble.
We still have negative divergences in some indicators, and while it hasn't officially triggered yet, we've had three near miss Hindenburg Omen Signals this week.
Yes, I have taken these warnings, and have so for several weeks now, so I have been underperforming the indices recently, although making money since I still have some money in the stock funds and somehow I am still beating the returns of the C and S-funds. I just raised some cash - too soon apparently.
The problem with getting too defensive is that some of these companies that are leading the way, are really not that expensive because their earnings are growing so rapidly.
For example, Nvidia has a forward Price to Earnings (P/E) ratio of 26%. Their earnings are projected to grow 68% in the next year, so that is a reasonably priced company.
Micron, which I have highlighted as being off the charts with their stock price soaring recently, has a forward P/E ratio of just 8%. Their earnings are expected to grow by 34% over the next year.
Again, not over priced at all, but when a chart goes straight up, it tends to have issues when there are any hiccups, even if those hiccups are outside of the company like a geopolitical event, an increase in interest rates, or whatever.
Both may be good investments but perhaps vulnerable, and if these leaders stop holding up the major indices, we may actually notice the damage going on underneath the surface in the stock market.
Look at some of these very familiar names that we are used to seeing as top performers in their industries. I could list dozens like this.
Right now investors may be using the high flying A-I / semiconductor companies as a safety trade. We saw this before when Mag 7 was all the rage. Meanwhile the rest of the stock market may be showing signs of trouble.
Admin Note: I have to go out of town this afternoon so Friday's commentary is questionable at this point. We will make sure all the returns and share prices get updated, but I may not be able to post much except maybe a quick check in for Friday's commentary. My apologies for any inconvenience this may cause.
Additional TSP Fund Charts:
DWCPF (S-fund) was slightly positive yesterday after gaining back a moderate size morning loss. It is still struggling to make new highs like the large caps, but that's actually not a bad thing. Consolidating while forming a base may be a better set up. And how about filling in the gap near 2600 while you're at it? I'm tired of looking at it.
ACWX (I-fund) had a big day - for whatever reason. The dollar wasn't down, oil was flat, and yields were up. Not usually the recipe for a big day in the international markets. The positive reversal day on Monday helped.
BND (bonds / F-fund) is back testing the lower end of that blue trading channel. Can that hold or will the open gap down by 72.60 finally get some attention?
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
Updated monthly:
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.
