Stocks opened higher on Thursday but the rally didn't last long as the bears decided to pounce on an opportunity to sell the big rally off of Wednesday's wild Fed day. The Dow only lost about 30-points, but the broader indices like the Nasdaq and small caps were beaten down again. Yields sank so bonds were up, and the dollar broke down from its formation.
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I posted the S&P 500 / C-fund chart above so let's go to the small caps, which took a hit yesterday. The DWCPF Index (S-fund) gave back all of Wednesday's gains yesterday, plus some. The 200-day EMA acted as resistance while the 280-average (1 year) held again as support. My guess is that the red box is just another consolidation near the lows that we typically see. The only big concern I have is that the prior support tests of the orange moving average held where this recent one did not, so there is something different happening this time around compared to other pullbacks. But seasonality and the fact that this is already down over 12% from its highs over the last month suggests we could see another rebound in the short-term. Of course that's the easy call before the holidays. We know the people that can push the market would probably like to fool us again, a la Christmas week of 2018.
The EFA (I-fund) rallied early but failed to break back above the 50-day EMA before pulling back and giving back the early gains. The weakness in the dollar yesterday helped this fund hold up better than the U.S. funds.
BND (Bonds / F-fund) rallied and is back above the moving average as the back and forth continues. It could bounce within that trading channel for a while and that would be some pretty good moves, but ultimately I suspect 2022 will be another rough year for bonds.
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
For more info our other premium services, please go here... www.tsptalk.com/premiums.html
To get weekly or daily notifications when we post new commentary, sign up HERE.
Thanks for reading. Have a great weekend!
Tom Crowley
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.
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You might be surprised to hear me say that yesterday's crazy day didn't mean all that much - yet, anyway. There's a lot of slight of hand and coercion going on right now after the crazy day of trading after the Fed on Wednesday, and in front of today's quadruple witching expiration.
The action may be trying to get us to lean one way, and the charts may be pointing another, but I don't know how much I can trust it all when we are heading into the final two weeks of December. The action over those two weeks could be setting us up for something completely different to start 2022, and I don't want to look out too far and pretend I know what will happen, because there will be those smoke screens that may be just trying to manipulate us along the way.
But when I look at the chart of the S&P 500 (C-fund) as an example, nothing really happened yesterday, except maybe another failed breakout, but the right shoulder of the inverted head and shoulders pattern is still filling in as we talked about yesterday as a possibility. The gap was filled earlier in the week and it remains above the 50-day EMA so it's hard to get too bearish looking at this. Could it fail? Of course, and with today being a major expiration day, you never know.
Internally the numbers weren't as bad as the indices suggest, although the Nasdaq was pretty weak. The NYSE actually had slightly higher advancing volume over declining. The 216 new 52-week lows on the Nasdaq was high, but well off the 600+ from the prior day.
The Yield on the 10-year Treasury was down sharply on Thursday as it traded between a couple of moving averages. The Fed's hawkish action may be putting pressure on the yields but the big gap is open on the upside, and interest rates will be going up next year so I still expect this to be higher down the road (F-fund down.)
The dollar did what we have been discussing, and that is, after a fake out breakout to the upside, we saw a breakdown, which is not uncommon pennant formation action.
They got me again this week. On Wednesday morning, before the Fed, I was buying into the stock funds while the indices were down testing the recent lows. By the close, and after the Fed, stocks rallied tremendously off those lows, and because of the TSP great rule about making our decision several hours before the close, I (and anyone else who bought in the TSP) ended up buying into the funds at the highs of the day instead of the lows. And, to rub salt in the wounds, they took the market back down toward those lows again on Thursday with me in them.
I've said it before, and it's likely just paranoia, but this 4 hour (at least) delay sure opens the door for at least the perception of manipulation during that 4 hour window between the deadline and the close, when so much TSP money is being moved within the funds each day, but particularly on days when trading volatility is elevated. If these swings favored me once in a while, I probably wouldn't complain so much.
Again, it's quadruple witching Friday in front of the start of the typical Santa Claus Rally two week period. Barring any crashes or major events over the next two weeks, trading volume should lighten up which tends to favor the bulls as traders take time off, and investors continue to make their automatic payroll contributions into the stock market, and that combination gives the market a bullish bias.
Today is the 17th, so history suggests next week could get better. Not always, but...
Chart provided courtesy of www.sentimentrader.com
The action may be trying to get us to lean one way, and the charts may be pointing another, but I don't know how much I can trust it all when we are heading into the final two weeks of December. The action over those two weeks could be setting us up for something completely different to start 2022, and I don't want to look out too far and pretend I know what will happen, because there will be those smoke screens that may be just trying to manipulate us along the way.
But when I look at the chart of the S&P 500 (C-fund) as an example, nothing really happened yesterday, except maybe another failed breakout, but the right shoulder of the inverted head and shoulders pattern is still filling in as we talked about yesterday as a possibility. The gap was filled earlier in the week and it remains above the 50-day EMA so it's hard to get too bearish looking at this. Could it fail? Of course, and with today being a major expiration day, you never know.
Internally the numbers weren't as bad as the indices suggest, although the Nasdaq was pretty weak. The NYSE actually had slightly higher advancing volume over declining. The 216 new 52-week lows on the Nasdaq was high, but well off the 600+ from the prior day.
The Yield on the 10-year Treasury was down sharply on Thursday as it traded between a couple of moving averages. The Fed's hawkish action may be putting pressure on the yields but the big gap is open on the upside, and interest rates will be going up next year so I still expect this to be higher down the road (F-fund down.)
The dollar did what we have been discussing, and that is, after a fake out breakout to the upside, we saw a breakdown, which is not uncommon pennant formation action.
They got me again this week. On Wednesday morning, before the Fed, I was buying into the stock funds while the indices were down testing the recent lows. By the close, and after the Fed, stocks rallied tremendously off those lows, and because of the TSP great rule about making our decision several hours before the close, I (and anyone else who bought in the TSP) ended up buying into the funds at the highs of the day instead of the lows. And, to rub salt in the wounds, they took the market back down toward those lows again on Thursday with me in them.
I've said it before, and it's likely just paranoia, but this 4 hour (at least) delay sure opens the door for at least the perception of manipulation during that 4 hour window between the deadline and the close, when so much TSP money is being moved within the funds each day, but particularly on days when trading volatility is elevated. If these swings favored me once in a while, I probably wouldn't complain so much.
Again, it's quadruple witching Friday in front of the start of the typical Santa Claus Rally two week period. Barring any crashes or major events over the next two weeks, trading volume should lighten up which tends to favor the bulls as traders take time off, and investors continue to make their automatic payroll contributions into the stock market, and that combination gives the market a bullish bias.
Today is the 17th, so history suggests next week could get better. Not always, but...
Chart provided courtesy of www.sentimentrader.com
I posted the S&P 500 / C-fund chart above so let's go to the small caps, which took a hit yesterday. The DWCPF Index (S-fund) gave back all of Wednesday's gains yesterday, plus some. The 200-day EMA acted as resistance while the 280-average (1 year) held again as support. My guess is that the red box is just another consolidation near the lows that we typically see. The only big concern I have is that the prior support tests of the orange moving average held where this recent one did not, so there is something different happening this time around compared to other pullbacks. But seasonality and the fact that this is already down over 12% from its highs over the last month suggests we could see another rebound in the short-term. Of course that's the easy call before the holidays. We know the people that can push the market would probably like to fool us again, a la Christmas week of 2018.
The EFA (I-fund) rallied early but failed to break back above the 50-day EMA before pulling back and giving back the early gains. The weakness in the dollar yesterday helped this fund hold up better than the U.S. funds.
BND (Bonds / F-fund) rallied and is back above the moving average as the back and forth continues. It could bounce within that trading channel for a while and that would be some pretty good moves, but ultimately I suspect 2022 will be another rough year for bonds.
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
For more info our other premium services, please go here... www.tsptalk.com/premiums.html
To get weekly or daily notifications when we post new commentary, sign up HERE.
Thanks for reading. Have a great weekend!
Tom Crowley
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.
