A late sell off completely changed the character of yesterday's trading session. Stocks down, bonds down, the dollar was down, high yield corporate bonds down, oil and energy sector down, lumber down, and gold held onto a slight gain as the inflation play was one of the few positives. That wasn't how the day started, but that's how it ended. The Dow lost 267-points. The I-fund got a boost from the weak dollar, and perhaps the timing of the late selling in the U.S.
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The only headline that I saw that might have had a part in that interesting broad reversal came from Janet Yellen yesterday when she said, “With corporate taxes at a historical low of one percent of GDP, we believe the corporate sector can contribute to this effort by bearing its fair share: we propose simply to return the corporate tax toward historical norms.” She said that at the Chamber’s Global Forum on Economic Recovery. Was that the catalyst? As far as what happened to the indices, we saw small caps stall right where we pointed out yesterday, and while that S-fund chart and the Nasdaq chart continue to struggle, a case could be made that the S&P 500 is holding up well and is just digesting last weeks big two day rally as we see a possible bull flag forming.
Internally the numbers got worse as the day went on but because of the late selling it may not have been as bad as it might have if the selling was slow and steady all day long. The Nasdaq was doing really well until that negative reversal as volume was still nearly 2 to 1 positive despite the late losses.
The dollar tanked again and fell below February's low, so the inflation talk picked up.
The charts haven't broken yet as far as holding last week's lows, but a day like yesterday certainly gets your attention reminding us how vulnerable the indices are, and how quickly things can fall apart.
The S&P 500 (C-fund) was up early yesterday but it stayed flat for most of the day before the late selling kicked in. The loss may have created what looks like a bull flag, but if we look back at prior pullbacks we can see that there has been a trend of positive reversals that fail initially, another lower low is created, then another rally ensues. Perhaps the bulls will just have to be patient, but the action certain warrants concern.
The DWCPF (S-fund) is doing something similar in that it failed at the 50-day EMA twice in March before eventually plowing higher again. This failure was a little more harsh this time in that the index was pressing the 50 day average until very late yesterday when the selling started, and unlike what we saw in March, it didn't close near the highs of the day. Instead it closed at the lows of the day after failing at the average. The one positive I see here is that it did recently break above the descending trend line, but that line was falling at a pretty steep angle.
The EFA shows a gain and the fact that the selling came late may have kept the I-fund price buoyant. The weakness in the dollar helped and the TSP gave the I-fund a very favorable price, but some of that could be adjusted down with today's price. The continued weakness in the dollar has helped the I-fund outperform the C and S funds recently.
The Transportation Index was down over 1% on the day but it is still a stone's throw from its recent highs. It looks like that negative reversal on May 10th may have been a short-term peak and could be temporary - as long as the rising support line off the lows, which is parallel to the top of the channel, can continue to hold.
BND (F-fund) looks to be flipping over again after the failure at the moving averages. Not a great looking chart and rallies probably need to be sold in 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. We'll see you back here tomorrow.
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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The only headline that I saw that might have had a part in that interesting broad reversal came from Janet Yellen yesterday when she said, “With corporate taxes at a historical low of one percent of GDP, we believe the corporate sector can contribute to this effort by bearing its fair share: we propose simply to return the corporate tax toward historical norms.” She said that at the Chamber’s Global Forum on Economic Recovery. Was that the catalyst? As far as what happened to the indices, we saw small caps stall right where we pointed out yesterday, and while that S-fund chart and the Nasdaq chart continue to struggle, a case could be made that the S&P 500 is holding up well and is just digesting last weeks big two day rally as we see a possible bull flag forming.
Internally the numbers got worse as the day went on but because of the late selling it may not have been as bad as it might have if the selling was slow and steady all day long. The Nasdaq was doing really well until that negative reversal as volume was still nearly 2 to 1 positive despite the late losses.
The dollar tanked again and fell below February's low, so the inflation talk picked up.
The charts haven't broken yet as far as holding last week's lows, but a day like yesterday certainly gets your attention reminding us how vulnerable the indices are, and how quickly things can fall apart.
The S&P 500 (C-fund) was up early yesterday but it stayed flat for most of the day before the late selling kicked in. The loss may have created what looks like a bull flag, but if we look back at prior pullbacks we can see that there has been a trend of positive reversals that fail initially, another lower low is created, then another rally ensues. Perhaps the bulls will just have to be patient, but the action certain warrants concern.
The DWCPF (S-fund) is doing something similar in that it failed at the 50-day EMA twice in March before eventually plowing higher again. This failure was a little more harsh this time in that the index was pressing the 50 day average until very late yesterday when the selling started, and unlike what we saw in March, it didn't close near the highs of the day. Instead it closed at the lows of the day after failing at the average. The one positive I see here is that it did recently break above the descending trend line, but that line was falling at a pretty steep angle.
The EFA shows a gain and the fact that the selling came late may have kept the I-fund price buoyant. The weakness in the dollar helped and the TSP gave the I-fund a very favorable price, but some of that could be adjusted down with today's price. The continued weakness in the dollar has helped the I-fund outperform the C and S funds recently.
The Transportation Index was down over 1% on the day but it is still a stone's throw from its recent highs. It looks like that negative reversal on May 10th may have been a short-term peak and could be temporary - as long as the rising support line off the lows, which is parallel to the top of the channel, can continue to hold.
BND (F-fund) looks to be flipping over again after the failure at the moving averages. Not a great looking chart and rallies probably need to be sold in 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. We'll see you back here tomorrow.
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.
