Stocks gapped open sharply higher on Thursday as the post Fed and post META earnings brought in another wave of buying. The early triple digit gain in the Dow made it appear that the winning streak would easy move to 14 days, a record since 1897, but it turned out that the opening gains were the high of the day, and stocks reversed lower the rest of the day. Bond yields moved sharply higher, as did the dollar, and that was a little too much to keep the winning streak in stocks going.
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The losses weren't terrible yesterday with the major indices losing only a little more than a half of a percent on the day, but it was the jolting reversal off the highs that looks concerning. The S&P 500 fell 70 points from the morning high to the close, and the Russell 2000 lost 2% off its early high.
Internally it did get quite lopsided on the descending side.
I don't know who these analysts are but they really stink at their earnings estimates. There were a ton of companies reporting after the bell yesterday and most of them were beating estimates handily. Prior to the recent parabolic move in stocks (OK, maybe not quite parabolic) stocks were selling off because earnings were supposed to be significantly lower than last year because of the economic slowdown and higher interest rates. But one by one earnings are coming in either better than expected, or much better than expected, with the catalyst for the stock price movement being the company's guidance. Is this just a game to get investors to sell and later, when companies beat estimates, know stocks will likely rally?
Despite the beats we got yesterday's market action which could be the start of the "sell the news" reaction, even though the news in earnings and the Fed's possible ending to interest rate hikes, has been a positive development.
Yesterday I mentioned that yields breaking above a long term resistance line could be making everything different than it was over the prior 35 years. Well one thing that may not change is the idea that sentiment, at extremes, can bring a change in direction. And those "buy the rumor, sell the news" reactions is another way that works.
The Yield on the 10-year Treasury moved back above 4% yesterday and that gave the F-fund a walloping, so both stocks and bond funds were down on the day. I heard something about the Japanese seeking yield in the US Treasuries as the Bank of Japan tries to manipulate their yield curve.
The dollar spiked dramatically higher ending its two day pullback, and that is going to give the I-fund some trouble, although the I-fund was playing catch up yesterday after the post-Fed rally in the US on Wednesday got priced into the overseas markets in the wee overnight trading hours of Thursday morning.
I don't want to dwell on the price of oil since relatively speaking, it isn't all that high, but it did close back above 80 and we can see evidence that the downtrend may have come to an end, meaning perhaps higher prices over the next few months as a few layers of resistance has been taken out.
We will get the PCE Prices and Personal Income and Spending reports this morning before the opening bell, key inflation data for the Fed. It could be a market mover and there are some make or break formations on many of the charts right now that could determine if yesterday was just a one day wonder for the bears.
The S&P 500 (C-fund) gapped open higher, tapped the top of its overhead resistance line, then retreated and created a negative outside reversal day. That's typically bearish for the short term but in recent months a lot of these types of formations haven't always behaved the way we might expect. The open gap is still there for the taking near 4450 if the bears have it in them, otherwise the shorter term rising support line is is near 4525.
DWCPF (S-fund) took a more severe loss, and while that may still be a bullish flag forming, the negative outside reversal day is concerning for the short term. It also closed just slightly below that old resistance line, which had become support.
EFA (I-fund) was down, but not as much as we might expect with the dollar up almost 1%, and US stocks falling sharply. However, the overseas market had close before most of the damage was done in the US indices. It could play catch up (to the losses) today.
BND (bonds / F-fund) fell sharply and finally filled that large open gap by 72. Now the question is if the bottom of that gap, or the 200-day MA (orange) can hold on any further selling 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
Daily Market Commentary Archives
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Thanks so much 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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The losses weren't terrible yesterday with the major indices losing only a little more than a half of a percent on the day, but it was the jolting reversal off the highs that looks concerning. The S&P 500 fell 70 points from the morning high to the close, and the Russell 2000 lost 2% off its early high.
Internally it did get quite lopsided on the descending side.
I don't know who these analysts are but they really stink at their earnings estimates. There were a ton of companies reporting after the bell yesterday and most of them were beating estimates handily. Prior to the recent parabolic move in stocks (OK, maybe not quite parabolic) stocks were selling off because earnings were supposed to be significantly lower than last year because of the economic slowdown and higher interest rates. But one by one earnings are coming in either better than expected, or much better than expected, with the catalyst for the stock price movement being the company's guidance. Is this just a game to get investors to sell and later, when companies beat estimates, know stocks will likely rally?
Despite the beats we got yesterday's market action which could be the start of the "sell the news" reaction, even though the news in earnings and the Fed's possible ending to interest rate hikes, has been a positive development.
Yesterday I mentioned that yields breaking above a long term resistance line could be making everything different than it was over the prior 35 years. Well one thing that may not change is the idea that sentiment, at extremes, can bring a change in direction. And those "buy the rumor, sell the news" reactions is another way that works.
The Yield on the 10-year Treasury moved back above 4% yesterday and that gave the F-fund a walloping, so both stocks and bond funds were down on the day. I heard something about the Japanese seeking yield in the US Treasuries as the Bank of Japan tries to manipulate their yield curve.
The dollar spiked dramatically higher ending its two day pullback, and that is going to give the I-fund some trouble, although the I-fund was playing catch up yesterday after the post-Fed rally in the US on Wednesday got priced into the overseas markets in the wee overnight trading hours of Thursday morning.
I don't want to dwell on the price of oil since relatively speaking, it isn't all that high, but it did close back above 80 and we can see evidence that the downtrend may have come to an end, meaning perhaps higher prices over the next few months as a few layers of resistance has been taken out.
We will get the PCE Prices and Personal Income and Spending reports this morning before the opening bell, key inflation data for the Fed. It could be a market mover and there are some make or break formations on many of the charts right now that could determine if yesterday was just a one day wonder for the bears.
The S&P 500 (C-fund) gapped open higher, tapped the top of its overhead resistance line, then retreated and created a negative outside reversal day. That's typically bearish for the short term but in recent months a lot of these types of formations haven't always behaved the way we might expect. The open gap is still there for the taking near 4450 if the bears have it in them, otherwise the shorter term rising support line is is near 4525.
DWCPF (S-fund) took a more severe loss, and while that may still be a bullish flag forming, the negative outside reversal day is concerning for the short term. It also closed just slightly below that old resistance line, which had become support.
EFA (I-fund) was down, but not as much as we might expect with the dollar up almost 1%, and US stocks falling sharply. However, the overseas market had close before most of the damage was done in the US indices. It could play catch up (to the losses) today.
BND (bonds / F-fund) fell sharply and finally filled that large open gap by 72. Now the question is if the bottom of that gap, or the 200-day MA (orange) can hold on any further selling 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
Daily Market Commentary Archives
To get weekly or daily notifications when we post new commentary, sign up HERE.
Thanks so much 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.
