5/05/25
Stocks got off to a sluggish start on Monday but the dip buyers showed up and moved the Dow into positive territory and the S&P 500 within 3-points of even before a late sell off pushed the indices back near their opening lows, so the 9-day winning streak is finally over. The loss was less than half of Friday's loss so it wasn't very significant, but it may serve to create some consolidation before an attempt at another leg higher. Bonds are struggling, but yields are still fairly stable. The I-fund led again.
There's so much going on between earnings, the Fed meeting this week, the reaction to tariffs, etc., that I have almost stopped listening to the noise and have relied even more that usual on the charts for clues. The index and bond charts are pictures of what the dumb money, smart money, big money, small money and your money is thinking and doing and following them is to me a little less confusing than trying to decipher the headlines.
I know I bore you with the 10-year Treasury Yield almost everyday, but it is very telling. One thing I have been stressing is that it is not necessarily where yields are at any given moment that matters most. It's what direction they are moving in, and how quickly are they moving.
The 10-year Yield has been up sharply in recent days but it has been remaining in a fairly tight and contained range for the last few months. That makes it easier on investors to make decisions in the stock market. Here is a one year chart of the 10-year and you can see that the sharp ups and downs have turned into some stabilization recently.
I didn't want to make the chart too noisy but there is actually a large head and shoulders pattern in there starting with the left shoulder in October of last year. if this plays out it would suggest much lower yields in the coming months. That sounds good but it may take a recession to get to the target price should the H&S breakdown, as they tend to do. Maybe it will be something else that causes it, but the chart suggests lower yields down the road.
The dollar (UUP) is starting to look better (bullish) to me but there are still obstacles. It has come shown sharply but that mini inverted head and shoulders pattern and consolidation above the neckline looks promising, however there is now a possible bear flag formed and there is imminent resistance at the top of that blue descending trading channel.
My theory that the dollar may get stronger has been ignored by the ACWX (I-fund), which continues to defy gravity, mostly due to the recent weakness in the dollar, so if the dollar does find its footing and start rallying, this chart could change. A trend trader might suggest not changing anything until the trend changes, which is a valid approach, but I'm looking at the potential for a reversal in both charts instead.
The S&P 500 (C-fund) was down modestly after a 9-day winning streak and it remains near a one month high after a dramatic trip to its lows some 900 points lower. Yesterday's decline was on very light trading volume so it doesn't look too serious yet, but anyone with cash is probably rooting for some kind of a pullback to do some buying. Of course when we do get a pullback you start to get thoughts of the bear market resuming and you freeze, so it's never easy.
I want to keep an eye on the Dow transportation Index since as a market leader that is very sensitive to economic conditions, the direction this breaks will be very telling. That looks like a bear flag to me but it did nudge above that red descending resistance line last week. The 50-day average is still just overhead so we have a serious pivot point here. Less than 13,500 is trouble, a move above 14,350 opens the door to another leg higher. Everything in between is still consolidation for that next move.
The FOMC meeting starts today and tomorrow afternoon we will get the policy statement and I believe a press conference from Powell.
DWCPF (S-fund) was down and is experiencing some pressure from the overhead resistance. The surprise here would be continued upside, and we know how the market loves to surprise us. But the resistance is giving this chart an excuse to take a breather, maybe pull back and catch its breadth for another run later on. 2000 was key resistance on the way up, and now it will be key support if there is a pullback.
The BND (F-fund) was down again and like the 10-year Yield which I posted up top, this remains in a range. That's not terrible but I don't see too much of a reason to be in bonds unless this can breakout above 73.25 - or as a short-term trade, a buy near 72.25 may work out, and it's close already. But who wants to waste two IFTs on a small move in bonds?
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 may use additional methods and strategies to determine fund positions.
Stocks got off to a sluggish start on Monday but the dip buyers showed up and moved the Dow into positive territory and the S&P 500 within 3-points of even before a late sell off pushed the indices back near their opening lows, so the 9-day winning streak is finally over. The loss was less than half of Friday's loss so it wasn't very significant, but it may serve to create some consolidation before an attempt at another leg higher. Bonds are struggling, but yields are still fairly stable. The I-fund led again.
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There's so much going on between earnings, the Fed meeting this week, the reaction to tariffs, etc., that I have almost stopped listening to the noise and have relied even more that usual on the charts for clues. The index and bond charts are pictures of what the dumb money, smart money, big money, small money and your money is thinking and doing and following them is to me a little less confusing than trying to decipher the headlines.
I know I bore you with the 10-year Treasury Yield almost everyday, but it is very telling. One thing I have been stressing is that it is not necessarily where yields are at any given moment that matters most. It's what direction they are moving in, and how quickly are they moving.
The 10-year Yield has been up sharply in recent days but it has been remaining in a fairly tight and contained range for the last few months. That makes it easier on investors to make decisions in the stock market. Here is a one year chart of the 10-year and you can see that the sharp ups and downs have turned into some stabilization recently.
I didn't want to make the chart too noisy but there is actually a large head and shoulders pattern in there starting with the left shoulder in October of last year. if this plays out it would suggest much lower yields in the coming months. That sounds good but it may take a recession to get to the target price should the H&S breakdown, as they tend to do. Maybe it will be something else that causes it, but the chart suggests lower yields down the road.
The dollar (UUP) is starting to look better (bullish) to me but there are still obstacles. It has come shown sharply but that mini inverted head and shoulders pattern and consolidation above the neckline looks promising, however there is now a possible bear flag formed and there is imminent resistance at the top of that blue descending trading channel.
My theory that the dollar may get stronger has been ignored by the ACWX (I-fund), which continues to defy gravity, mostly due to the recent weakness in the dollar, so if the dollar does find its footing and start rallying, this chart could change. A trend trader might suggest not changing anything until the trend changes, which is a valid approach, but I'm looking at the potential for a reversal in both charts instead.
The S&P 500 (C-fund) was down modestly after a 9-day winning streak and it remains near a one month high after a dramatic trip to its lows some 900 points lower. Yesterday's decline was on very light trading volume so it doesn't look too serious yet, but anyone with cash is probably rooting for some kind of a pullback to do some buying. Of course when we do get a pullback you start to get thoughts of the bear market resuming and you freeze, so it's never easy.
I want to keep an eye on the Dow transportation Index since as a market leader that is very sensitive to economic conditions, the direction this breaks will be very telling. That looks like a bear flag to me but it did nudge above that red descending resistance line last week. The 50-day average is still just overhead so we have a serious pivot point here. Less than 13,500 is trouble, a move above 14,350 opens the door to another leg higher. Everything in between is still consolidation for that next move.
The FOMC meeting starts today and tomorrow afternoon we will get the policy statement and I believe a press conference from Powell.
DWCPF (S-fund) was down and is experiencing some pressure from the overhead resistance. The surprise here would be continued upside, and we know how the market loves to surprise us. But the resistance is giving this chart an excuse to take a breather, maybe pull back and catch its breadth for another run later on. 2000 was key resistance on the way up, and now it will be key support if there is a pullback.
The BND (F-fund) was down again and like the 10-year Yield which I posted up top, this remains in a range. That's not terrible but I don't see too much of a reason to be in bonds unless this can breakout above 73.25 - or as a short-term trade, a buy near 72.25 may work out, and it's close already. But who wants to waste two IFTs on a small move in bonds?
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.
