Stocks got a little relief on Thursday thanks to a reversal in the current trigger points for the market - yields, the dollar, and oil. The Dow gained 116-points and we saw larger gains in the broader indices with small caps leading again. The index charts are bouncing in convenient levels but as you'll see in the charts below, there has not been any change in trend in those triggering catalysts, making the rebound suspect at the moment.
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The strength in yields, the dollar and oil had been getting extreme and some relief from that pressure is not a surprise, but it's certainly too early, after one down day, to say they have peaked or the trend is changing. Making that call would be dangerous but bold, especially if correct.
The 10-year Treasury Yield had a negative reversal day but the modest losses didn't even pull it below the resistance line that it pushed above on Wednesday. There is certainly more room on the downside in the trading channel so a little continued short-term decline in these wouldn't be a surprise, and that open gap may be a minimal target. Of course the PCE Pricing report before the bell this morning could change all of that if it comes in too hot.
The dollar is in the same boat but the channel is much more narrow and perhaps more vulnerable to a breakdown, but it too looks strong at the moment. There are several gaps still open (red) below, but UUP would have to break below support to get filled.
And oil rolled over after an early move to a new high. The low yesterday could be considered support as it is near some prior highs, and like the 10-year yield, the trading channel does have a lot more room on the downside so the risk / reward may be in favor of a pullback in the short-term.
The Dow Transpiration Index closed back above its 200-day EMA after two closes below it. The 200-EMA is always a convenient place for a low so we have to consider that a possibility, just as the S&P 500 is showing respect to its 200-day EMA, as you'll see down below.
We'll get key inflation data in the PCE and Personal Spending reports this morning before the open bell so we might see a gap in one direction or the other, depending on the outcome. Too hot, and stocks could resume the downside. A cool report may keep a short-term rally going.
There's a chance of a "new month / new direction " situation, as well as a new quarter, and October 1st does have a good record, but historically the negative fall seasonality doesn't get better until about the second week of the month.
Chart provided courtesy of www.sentimentrader.com
October has a bad reputation because of some infamous market crashes going back a century, but it's actually not a bad month for stocks overall on average.
The S-fund chart down below scares me most as yesterday's high was at a wall of resistance that would have to be taken out if the current bounce is going to continue.
The S&P 500 (C-fund) followed through on Wednesday's reversal and bounced above the 200-day EMA, so there have been no closes below that average yet. That could have happened even if we haven't had a low and could have just been a convenient pace for an oversold rally, which may or may not turn out to be temporary. October will be an interesting month. It could be explosive if yields, oil and the dollar cooperate, otherwise we could get a repeat of September. The short-term, however, may be all about today's PCE Report.
DWCPF (S-fund) rallied nicely, leading the way and moving up to the neckline of its broken head and shoulders pattern, and the bottom of the open gap, and near its descending resistance line. All of those resistance levels held firmly so this is concerning and could be a place for the relief rally to die. It seems early for that to be the case so it needs help right here, right now.
The EFA (I-fund) also had a good day and looks like it has a little overhead room to run before hitting any resistance. But it's fallen hard so even a nice bounce would only put a Band-Aid on a broken chart.
BND (bonds / F-fund) finally saw a move up but as you can see it isn't putting a dent in the damage that's been done here. Like stocks, this is due for some relief, even if the trend stays down.
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 strength in yields, the dollar and oil had been getting extreme and some relief from that pressure is not a surprise, but it's certainly too early, after one down day, to say they have peaked or the trend is changing. Making that call would be dangerous but bold, especially if correct.
The 10-year Treasury Yield had a negative reversal day but the modest losses didn't even pull it below the resistance line that it pushed above on Wednesday. There is certainly more room on the downside in the trading channel so a little continued short-term decline in these wouldn't be a surprise, and that open gap may be a minimal target. Of course the PCE Pricing report before the bell this morning could change all of that if it comes in too hot.
The dollar is in the same boat but the channel is much more narrow and perhaps more vulnerable to a breakdown, but it too looks strong at the moment. There are several gaps still open (red) below, but UUP would have to break below support to get filled.
And oil rolled over after an early move to a new high. The low yesterday could be considered support as it is near some prior highs, and like the 10-year yield, the trading channel does have a lot more room on the downside so the risk / reward may be in favor of a pullback in the short-term.
The Dow Transpiration Index closed back above its 200-day EMA after two closes below it. The 200-EMA is always a convenient place for a low so we have to consider that a possibility, just as the S&P 500 is showing respect to its 200-day EMA, as you'll see down below.
We'll get key inflation data in the PCE and Personal Spending reports this morning before the open bell so we might see a gap in one direction or the other, depending on the outcome. Too hot, and stocks could resume the downside. A cool report may keep a short-term rally going.
There's a chance of a "new month / new direction " situation, as well as a new quarter, and October 1st does have a good record, but historically the negative fall seasonality doesn't get better until about the second week of the month.
Chart provided courtesy of www.sentimentrader.com
October has a bad reputation because of some infamous market crashes going back a century, but it's actually not a bad month for stocks overall on average.
The S-fund chart down below scares me most as yesterday's high was at a wall of resistance that would have to be taken out if the current bounce is going to continue.
The S&P 500 (C-fund) followed through on Wednesday's reversal and bounced above the 200-day EMA, so there have been no closes below that average yet. That could have happened even if we haven't had a low and could have just been a convenient pace for an oversold rally, which may or may not turn out to be temporary. October will be an interesting month. It could be explosive if yields, oil and the dollar cooperate, otherwise we could get a repeat of September. The short-term, however, may be all about today's PCE Report.
DWCPF (S-fund) rallied nicely, leading the way and moving up to the neckline of its broken head and shoulders pattern, and the bottom of the open gap, and near its descending resistance line. All of those resistance levels held firmly so this is concerning and could be a place for the relief rally to die. It seems early for that to be the case so it needs help right here, right now.
The EFA (I-fund) also had a good day and looks like it has a little overhead room to run before hitting any resistance. But it's fallen hard so even a nice bounce would only put a Band-Aid on a broken chart.
BND (bonds / F-fund) finally saw a move up but as you can see it isn't putting a dent in the damage that's been done here. Like stocks, this is due for some relief, even if the trend stays down.
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.
