09/29/25
Stocks rallied on Friday after the PCE Prices inflation data came inline with estimates. The TSP stocks funds were all up on the day, but all three experienced a modest to moderate loss for the week. September is quickly coming to an end and the funds have all but locked in a gain for the month that had a bearish reputation. Now comes the most volatile month of the year, although generally bullish.
There are many forces working on the stock market right now. The most bullish right now is the Fed's monetary policy as they started what could be a series of interest rate cuts. One of the more bearish pressures on the market right now is how overbought the indices are. Being overbought, however, does not mean stocks have to come down. Historically overbought markets do tend to become more fairly valued eventually, but it's not something that is easy to put a timer on it.
According to Barchart, "U.S. Stock Market hits most expensive valuation in history, surpassing the Dot Com Bubble and the run-up to the Great Depression."
Another intangible that doesn't have anything to do with valuations or interest rates, is seasonality. October has a bullish bias, but it is also the most volatile month historical. Often market bottoms are made in October, but of course you need a decline and a low to create a bottom, and we haven't had one of those in a while.
Typically any August and September weakness creeps into October, and things often turn around before the end of the month, but this year, barring any two day disaster, stocks will be rallying into October.
This post from Wayne Whaley shows several tendencies. You can read more about in the source link below the chart, but briefly, when the first three quarters of the year show a gain of 10% or more, including a positive September, the 4th quarter does very well historically -- but October can be a volatile month, with one very rough week toward the end of the month.
Source: Wayne Whaley
It makes sense since stocks don't usually move in a straight line, and it has been virtually a straight line since the April lows.
So how volatile is October?
This chart from Bloomberg shows just how much more volatility there is in October compared to other months. It is not necessarily bearish as I mentioned, but we might want to anticipate some ups and downs next month.
The S&P 500 / C-fund rallied on Friday, filling in Thursday's open gap, and sometimes filling a gap can be a rebound's target, but we saw a similar gap fill in early September that led to another push from the bottom of the trading channel, back to the top. The trend has been a force. Will October be different?
The PMO momentum indicator is falling back below its moving average, and technically still trending lower with a negative divergence as we see another lower high despite higher highs in the S&P 500.
This week will see the release of several key economic reports including the ISM Manufacturing Index, the Chicago PMI, and Consumer Sentiment to name a few, but the highlight of the week will be the September jobs report on Friday.
The DWCPF (S-fund) had a big day and continued to bounce off of support after Thursday's positive reversal. Friday's gain filled Thursday's open gap, which could act as resistance, although retracing those long breakdown candlesticks is also possible.
ACWX (I-fund) is also reaching up to fill in the open gap from Thursday, after successfully retesting the August peak during last week's pullback. The dollar fell sharply on Friday after the inflation, data helping this fund.
BND (bonds / F-fund) was flat and remains below the old resistance line, above the rising support, and inside the old open gap.
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
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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 on Friday after the PCE Prices inflation data came inline with estimates. The TSP stocks funds were all up on the day, but all three experienced a modest to moderate loss for the week. September is quickly coming to an end and the funds have all but locked in a gain for the month that had a bearish reputation. Now comes the most volatile month of the year, although generally bullish.
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There are many forces working on the stock market right now. The most bullish right now is the Fed's monetary policy as they started what could be a series of interest rate cuts. One of the more bearish pressures on the market right now is how overbought the indices are. Being overbought, however, does not mean stocks have to come down. Historically overbought markets do tend to become more fairly valued eventually, but it's not something that is easy to put a timer on it.
According to Barchart, "U.S. Stock Market hits most expensive valuation in history, surpassing the Dot Com Bubble and the run-up to the Great Depression."
Another intangible that doesn't have anything to do with valuations or interest rates, is seasonality. October has a bullish bias, but it is also the most volatile month historical. Often market bottoms are made in October, but of course you need a decline and a low to create a bottom, and we haven't had one of those in a while.
Typically any August and September weakness creeps into October, and things often turn around before the end of the month, but this year, barring any two day disaster, stocks will be rallying into October.
This post from Wayne Whaley shows several tendencies. You can read more about in the source link below the chart, but briefly, when the first three quarters of the year show a gain of 10% or more, including a positive September, the 4th quarter does very well historically -- but October can be a volatile month, with one very rough week toward the end of the month.
Source: Wayne Whaley
It makes sense since stocks don't usually move in a straight line, and it has been virtually a straight line since the April lows.
So how volatile is October?
This chart from Bloomberg shows just how much more volatility there is in October compared to other months. It is not necessarily bearish as I mentioned, but we might want to anticipate some ups and downs next month.
The S&P 500 / C-fund rallied on Friday, filling in Thursday's open gap, and sometimes filling a gap can be a rebound's target, but we saw a similar gap fill in early September that led to another push from the bottom of the trading channel, back to the top. The trend has been a force. Will October be different?
The PMO momentum indicator is falling back below its moving average, and technically still trending lower with a negative divergence as we see another lower high despite higher highs in the S&P 500.
This week will see the release of several key economic reports including the ISM Manufacturing Index, the Chicago PMI, and Consumer Sentiment to name a few, but the highlight of the week will be the September jobs report on Friday.
The DWCPF (S-fund) had a big day and continued to bounce off of support after Thursday's positive reversal. Friday's gain filled Thursday's open gap, which could act as resistance, although retracing those long breakdown candlesticks is also possible.
ACWX (I-fund) is also reaching up to fill in the open gap from Thursday, after successfully retesting the August peak during last week's pullback. The dollar fell sharply on Friday after the inflation, data helping this fund.
BND (bonds / F-fund) was flat and remains below the old resistance line, above the rising support, and inside the old open gap.
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.
