It was quiet day of bullish trading for stocks, after the volatile news-driven week, last week. The gains were not big but meaningful when it's no secret at this point that this week is one of the worst weeks of the year for stocks historically. That's often how it goes when everyone expects the same thing. The fact that interest rates were just cut last week could make it "different this time", but it's not a time to get too comfortable.
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It is a post quadruple witching expiration week and that adds to the negative bias, and today has the setup to be a possible Turnaround Tuesday, but whatever happens, because of the election in just over a month, history suggests that volatility could continue to stay with us.
The 10-Year Treasury Yield was up early yesterday, and had ironically been up for a week while the Fed was cutting rates, but it did put in a negative reversal day and it closed right on the border of a resistance line, which is now being tested as support. Of course bond prices and the F-fund move counter to yields so, as you'll see in the BND bond chart at the bottom of this report that the bond market is testing some strong support right now.
The dollar put in an interesting positive reversal day last week on Fed day, but it has been struggling to get back above some resistance. The dollar tends to weaken when rates are falling, but there are other factors so the battle near 28.20 continues. A falling dollar tends to be better for stocks and anything priced in dollars, than a stronger, rising dollar.
The charts of a couple of the big market leaders are starting to look weaker for some reason. Microsoft and Apple, clearly the biggest of the big, may have some problems. They could easily break out of this funk, but as of right now these look troublesome. That's a "toppy" looking head and shoulders pattern on Microsoft's chart and it may have just completed, and failed, at a head test.
Apple has put in another lower high and on Friday it put in one of those negative reversal days that followed through on the downside yesterday. The PMO indicator shows waning momentum despite being just off the all time highs.
Even Nvidia's chart doesn't look so hot so perhaps this is part of the rotation into the small and broader indices we have been waiting for, but it may be tough for the S&P 500 to do well if the heaviest weighted companies start to stumble.
This AAII Investor Sentiment Survey chart shows that we have about two bulls for every one bear out there. 2 to 1 is a cautionary level, although it has frequently gone well past that. Often the best times to buy stocks is in the early stages when sentiment goes from very bearish (at extremes) and it starts to switch toward bullish. The best time to sell is often at euphoric levels when it starts to falter. We are at neither right now but leaning on the overly bullish side and that means we should probably stay on our toes and watch for a shift toward negative sentiment.
Although I am cautious, I don't want to sound too bearish overall because the action has been good, but almost everyone I hear on TV is bullish right now after the Fed's rate cut and that gets me suspicious since the market loves to get us leaning the wrong way before a rug pull. That said, most of my biggest timing mistakes over the years has been getting too bearish in a strong market so I could easily be wrong.
Friday's PCE Prices Report may be the highlight of the week as the Fed considers future interest rates vs. inflation.
The S&P 500 (C-fund) has been doing well and it recently broke out to new highs with the help of a double rate cut from the Fed last week. There is some resistance in the area despite the breakout, and the rally over the last two weeks looks a little fatigued as it has not retested last Thursday's high yet, so it may be looking to consolidate or pullback for a minute, and perhaps fill in that open gap. The bulls do have the momentum so any bearish thoughts or action will feel like swimming upstream.
The DWCPF (S-fund) lagged yesterday after completing what I was calling a large inverted head and shoulders pattern. Now I wonder if the large blue right shoulder was actually a successful test of the head? That would be an additional bullish sign, but again, this has come a long way in the last two weeks and we're heading into the seasonality headwinds again, so it's not an easy call for the short-term.
The EFA was up 0.38% yesterday and the new "ex USA ex China ex Hong Kong Index" was up 0.40% when the US markets closed, so I would expect an I-fund price for Monday to be right in that area.
We're still in limbo on the I-fund's transformation to the new components so guessing at the return before the TSP posts the price is a little tough a the moment. You will see the final price and return posted on our site by Monday evening. Here's more information from tsp.gov.
BND (F-fund) tested and seems to be holding at the 20-day EMA again. The last time it broke below the 20-day EMA, it headed to the 50-day where it found support, so that's the fork in the road right now for the bond market and the F-fund -- 20 or 50?
Thanks so much for reading! We'll see you 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.html
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 use additional methods and strategies to determine fund positions.
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It is a post quadruple witching expiration week and that adds to the negative bias, and today has the setup to be a possible Turnaround Tuesday, but whatever happens, because of the election in just over a month, history suggests that volatility could continue to stay with us.
The 10-Year Treasury Yield was up early yesterday, and had ironically been up for a week while the Fed was cutting rates, but it did put in a negative reversal day and it closed right on the border of a resistance line, which is now being tested as support. Of course bond prices and the F-fund move counter to yields so, as you'll see in the BND bond chart at the bottom of this report that the bond market is testing some strong support right now.
The dollar put in an interesting positive reversal day last week on Fed day, but it has been struggling to get back above some resistance. The dollar tends to weaken when rates are falling, but there are other factors so the battle near 28.20 continues. A falling dollar tends to be better for stocks and anything priced in dollars, than a stronger, rising dollar.
The charts of a couple of the big market leaders are starting to look weaker for some reason. Microsoft and Apple, clearly the biggest of the big, may have some problems. They could easily break out of this funk, but as of right now these look troublesome. That's a "toppy" looking head and shoulders pattern on Microsoft's chart and it may have just completed, and failed, at a head test.
Apple has put in another lower high and on Friday it put in one of those negative reversal days that followed through on the downside yesterday. The PMO indicator shows waning momentum despite being just off the all time highs.
Even Nvidia's chart doesn't look so hot so perhaps this is part of the rotation into the small and broader indices we have been waiting for, but it may be tough for the S&P 500 to do well if the heaviest weighted companies start to stumble.
This AAII Investor Sentiment Survey chart shows that we have about two bulls for every one bear out there. 2 to 1 is a cautionary level, although it has frequently gone well past that. Often the best times to buy stocks is in the early stages when sentiment goes from very bearish (at extremes) and it starts to switch toward bullish. The best time to sell is often at euphoric levels when it starts to falter. We are at neither right now but leaning on the overly bullish side and that means we should probably stay on our toes and watch for a shift toward negative sentiment.
Although I am cautious, I don't want to sound too bearish overall because the action has been good, but almost everyone I hear on TV is bullish right now after the Fed's rate cut and that gets me suspicious since the market loves to get us leaning the wrong way before a rug pull. That said, most of my biggest timing mistakes over the years has been getting too bearish in a strong market so I could easily be wrong.
Friday's PCE Prices Report may be the highlight of the week as the Fed considers future interest rates vs. inflation.
The S&P 500 (C-fund) has been doing well and it recently broke out to new highs with the help of a double rate cut from the Fed last week. There is some resistance in the area despite the breakout, and the rally over the last two weeks looks a little fatigued as it has not retested last Thursday's high yet, so it may be looking to consolidate or pullback for a minute, and perhaps fill in that open gap. The bulls do have the momentum so any bearish thoughts or action will feel like swimming upstream.
The DWCPF (S-fund) lagged yesterday after completing what I was calling a large inverted head and shoulders pattern. Now I wonder if the large blue right shoulder was actually a successful test of the head? That would be an additional bullish sign, but again, this has come a long way in the last two weeks and we're heading into the seasonality headwinds again, so it's not an easy call for the short-term.
The EFA was up 0.38% yesterday and the new "ex USA ex China ex Hong Kong Index" was up 0.40% when the US markets closed, so I would expect an I-fund price for Monday to be right in that area.
We're still in limbo on the I-fund's transformation to the new components so guessing at the return before the TSP posts the price is a little tough a the moment. You will see the final price and return posted on our site by Monday evening. Here's more information from tsp.gov.
BND (F-fund) tested and seems to be holding at the 20-day EMA again. The last time it broke below the 20-day EMA, it headed to the 50-day where it found support, so that's the fork in the road right now for the bond market and the F-fund -- 20 or 50?
Thanks so much for reading! We'll see you 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.html
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 use additional methods and strategies to determine fund positions.
