It was an interesting day of trading yesterday as the trio of the current bear triggering catalysts went in the bears' favor, yet stocks bounced back from deep session lows to close mixed, but mostly higher. Yields up, new highs. Dollar up, new highs. Oil up, new highs. That's an awful combination right now and even more confusing was that interest rate sensitive small caps led on the upside.
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The Dow was down but the other major indices closed flat to higher and breadth was in favor of the advancers. That was after the Dow was down 300+ points a few hours before the close, and the S&P erased a 35-point decline during the late rally. Trading volume wasn't all that impressive so it wasn't any sort of capitulation from the bulls, but after being down 5 of the last 6 days, the bears took a break from selling yesterday afternoon.
Once again the three troublesome catalysts for the stock market were up. The 10-year Treasury Yield jumped to new highs and cut through overhead resistance and the rising trading channel, and closed at 4.63%.
The dollar also jumped above resistance and closed at another 2023 high.
And oil. Not good. It closed well over $93 after a week of consolidating, so this is a red flag. Why stocks ignored this yesterday, I don't know, but let's take a look at how the price of oil has played out over the last couple of years just to see what has happened, and maybe what could happen.
Yesterday's rally pushed it to new high territory for 2023. It is hitting some resistance but as we saw in the dollar and 10-year T-note, resistance can get taken out.
The year to date chart shows that oil is well off the May lows and up about 15% for the year.
One year ago oil was also quite strong and it is now trading slightly above those 2022 fall highs.
And going back a couple of years warns us that is can get much worse.
But can the price of oil get worse if the higher interest rates are impacting the economy and potentially causing an eventual recession? That doesn't make too much sense, but oil isn't only priced on demand, but also on supply, which can be manipulated.
The S&P 500 is down about 7% from the late July highs, and that's about the same size pullback that we saw in March. This decline is about 2 months old now, while the March decline lasted only about 6 weeks. The 200-day EMA is being tested now, and that could have been the initial target, although in March the 200-day EMA was taken out fairly easily before it bottomed.
On Friday we'll get key inflation data in the PCE and Personal Spending reports and that could be a market mover.
Friday is also the end of the third quarter and we could see some window dressing shenanigans from money mangers to help make their quarterly reports look better.
The S&P 500 (C-fund) was up early, failed and collapsed below the 200-day EMA by early afternoon. It looked like capitulation in the classic sense with it bouncing back above the 200-EMA, but there was no trading volume to indicate any exclamation point on the downside. The lows yesterday didn't even quite fill the open gap from early June. It got close, but why didn't they just fill it? It is the final trading days of the third quarter so as I mentioned above, there could be some funny business and going on from money managers and hedge funds.
DWCPF (S-fund) led yesterday with its 0.89% gain, and it is also resting on the top of a large open gap near 1665. Being near the end of one quarter and the beginning of another, the gap either above or below, or both, could end up getting filled before this heads in the direction it plans to go in October.
The EFA (I-fund) lagged yesterday with the dollar up and the gains in the US market coming so late yesterday. It may have to play catch up today.
BND (bonds / F-fund) is getting more and more ugly, but sentiment is so bearish, I wonder who is still looking to sell bonds that hasn't already? At this point one of two things is likely to happen as I doubt it will just chop around quietly in this area. One, a crash. Two, a big relief rally. Maybe the Friday PCE Prices report will determine that?
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
For more info our other premium services, please go here... www.tsptalk.com/premiums.html
Daily Market Commentary Archives
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 Dow was down but the other major indices closed flat to higher and breadth was in favor of the advancers. That was after the Dow was down 300+ points a few hours before the close, and the S&P erased a 35-point decline during the late rally. Trading volume wasn't all that impressive so it wasn't any sort of capitulation from the bulls, but after being down 5 of the last 6 days, the bears took a break from selling yesterday afternoon.
Once again the three troublesome catalysts for the stock market were up. The 10-year Treasury Yield jumped to new highs and cut through overhead resistance and the rising trading channel, and closed at 4.63%.
The dollar also jumped above resistance and closed at another 2023 high.
And oil. Not good. It closed well over $93 after a week of consolidating, so this is a red flag. Why stocks ignored this yesterday, I don't know, but let's take a look at how the price of oil has played out over the last couple of years just to see what has happened, and maybe what could happen.
Yesterday's rally pushed it to new high territory for 2023. It is hitting some resistance but as we saw in the dollar and 10-year T-note, resistance can get taken out.
The year to date chart shows that oil is well off the May lows and up about 15% for the year.
One year ago oil was also quite strong and it is now trading slightly above those 2022 fall highs.
And going back a couple of years warns us that is can get much worse.
But can the price of oil get worse if the higher interest rates are impacting the economy and potentially causing an eventual recession? That doesn't make too much sense, but oil isn't only priced on demand, but also on supply, which can be manipulated.
The S&P 500 is down about 7% from the late July highs, and that's about the same size pullback that we saw in March. This decline is about 2 months old now, while the March decline lasted only about 6 weeks. The 200-day EMA is being tested now, and that could have been the initial target, although in March the 200-day EMA was taken out fairly easily before it bottomed.
On Friday we'll get key inflation data in the PCE and Personal Spending reports and that could be a market mover.
Friday is also the end of the third quarter and we could see some window dressing shenanigans from money mangers to help make their quarterly reports look better.
The S&P 500 (C-fund) was up early, failed and collapsed below the 200-day EMA by early afternoon. It looked like capitulation in the classic sense with it bouncing back above the 200-EMA, but there was no trading volume to indicate any exclamation point on the downside. The lows yesterday didn't even quite fill the open gap from early June. It got close, but why didn't they just fill it? It is the final trading days of the third quarter so as I mentioned above, there could be some funny business and going on from money managers and hedge funds.
DWCPF (S-fund) led yesterday with its 0.89% gain, and it is also resting on the top of a large open gap near 1665. Being near the end of one quarter and the beginning of another, the gap either above or below, or both, could end up getting filled before this heads in the direction it plans to go in October.
The EFA (I-fund) lagged yesterday with the dollar up and the gains in the US market coming so late yesterday. It may have to play catch up today.
BND (bonds / F-fund) is getting more and more ugly, but sentiment is so bearish, I wonder who is still looking to sell bonds that hasn't already? At this point one of two things is likely to happen as I doubt it will just chop around quietly in this area. One, a crash. Two, a big relief rally. Maybe the Friday PCE Prices report will determine that?
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
For more info our other premium services, please go here... www.tsptalk.com/premiums.html
Daily Market Commentary Archives
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.
