Stocks closed higher on both Friday and Monday and because of the Federal holiday, we won't get share prices for Monday's action, so all we have is the Friday prices and returns below. Tuesday's share prices will include the market action from Monday. Monday was a light volume trading day because the bond market and many banks were closed. The Dow ended the day up almost 200-points, after Friday's nearly 300 point gain. With the bond market closed, the futures did indicate a decline in yields, after Friday's move up.
Below is a 2-day chart of the S&P 500 (Friday and Monday), and the fund returns below on the right are from Friday.
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[TD="width: 338, align: center"] Daily TSP Funds Return
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By the way, that was the 14th positive Monday in a row. And the Nasdaq hasn't been down on a Monday since the 2nd quarter. I don't know what's up with that streak, but the bulls do need to see the other days hold onto these gains because the charts are still in downtrends.
A lot has happened since Friday's commentary as the Jobs report and the violence in the Middle East have stolen the headlines recently. I won't bore you with too many details since we all saw it on the news, but I have to do my job and look at the possible market ramifications.
In the case of the jobs report, it was an off the chart report - for whatever reason. The market is trying to figure out if the inflation driven rise in interest rates is going to cause a soft or hard landing for the economy, so a jobs report that comes in more than twice expectations was a head scratcher. After an initial sell off of the possible inflationary report, the stocks market reversed higher on Friday and closed with some big gains.
I heard a trader on CNBC yesterday suggest that the reversal in stocks on Friday after that jobs report, felt similar to the action after the first favorable CPI report a year ago when they thought inflation was being reigned in. Inflation turned out to be more sticky than that, but that was the low for the bear market. I don't know if we've seen a low in this correction yet, but the market has been in a pullback / correction to the tune of about 8% in the S&P 500, and it has been trying to bottom and we may have a set up for more short-term relief.
The activity in the Middle East also sent stocks lower at the opening bell, but again, after some digestion of the information, the bulls took control and reversed stocks higher into the close. Yields were down in the futures market and BND, the bond ETF and what we use to track the F-fund, did trade yesterday, and was up sharply. This gain will be incorporated in Tuesday's F-fund share price.
Yesterday's reversal in stocks did have a catalyst however, and that was Fed officials hinting that the rise in bond yields may have helped the Fed do their job in putting the breaks on inflation and that was interpreted as them saying they are done raising interest rates this year.
That erased a morning rally in the dollar, which also helped stocks in afternoon trading.
But here's your weekly reminder that the strength in the dollar has been directly influenced by the Federal Reserve reducing their balance sheet (Quantitative Tightening) and last week it was down another $47 billion. They are on a mission and this could continue to be a head wind for stocks.
The price of oil had a knee-jerk reaction to the violence in the Middle East, but that came on the heals of a severe decline over the last week or so. Declines like this usually don't turn out to be "V" bottoms, so I'd be surprised if it's smooth sailing for oil in the short-term, but given the geopolitical event, it could be "different this time?"
Stocks, bonds, and many other charts have had a big run after Friday's reversal so a little backing and filling could kick in. As you'll see down below, some of the charts are set up near resistance which often turns out in one of two ways -- a reversal back down, or a gap up above the resistance. It's not usually just a quiet reaction.
The S&P 500 (C-fund) has had a nice two-day rally and there's a large open gap above that could lure it higher, but it is also back up against that old neckline of the head and shoulders pattern, and the 20-day EMA. As I talked above above, this could be where it gets swatted back down, or we could get a gap up above the resistance. The reason is because the bulls and bears are betting heavy on their side at this level and whoever wins this battle will likely see some giving up from the other side.
DWCPF (S-fund, small caps) is also at some descending resistance. There's a ton of other resistance above that 1700 area so there's a lot to prove here. The bears have control at least until it gets above 1700 to 1740. Even 1760 looks tough.
The EFA (I-fund) was down slightly yesterday but as we often note, late moves in the US market does not generally get priced in here until the following day. US stocks obviously rallied late yesterday, and the dollar came down late as well so this did better than the chart shows, but we may not know until today.
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
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.
Below is a 2-day chart of the S&P 500 (Friday and Monday), and the fund returns below on the right are from Friday.
[TABLE="align: center"]
[TR]
[TD="align: center"]
[TD]
[/TD]
[TD="width: 338, align: center"] Daily TSP Funds Return
[TR]
[TD="align: right"][/TD]
[/TR]
[/TABLE]
[/TD]
[/TR]
[/TABLE]
By the way, that was the 14th positive Monday in a row. And the Nasdaq hasn't been down on a Monday since the 2nd quarter. I don't know what's up with that streak, but the bulls do need to see the other days hold onto these gains because the charts are still in downtrends.
A lot has happened since Friday's commentary as the Jobs report and the violence in the Middle East have stolen the headlines recently. I won't bore you with too many details since we all saw it on the news, but I have to do my job and look at the possible market ramifications.
In the case of the jobs report, it was an off the chart report - for whatever reason. The market is trying to figure out if the inflation driven rise in interest rates is going to cause a soft or hard landing for the economy, so a jobs report that comes in more than twice expectations was a head scratcher. After an initial sell off of the possible inflationary report, the stocks market reversed higher on Friday and closed with some big gains.
I heard a trader on CNBC yesterday suggest that the reversal in stocks on Friday after that jobs report, felt similar to the action after the first favorable CPI report a year ago when they thought inflation was being reigned in. Inflation turned out to be more sticky than that, but that was the low for the bear market. I don't know if we've seen a low in this correction yet, but the market has been in a pullback / correction to the tune of about 8% in the S&P 500, and it has been trying to bottom and we may have a set up for more short-term relief.
The activity in the Middle East also sent stocks lower at the opening bell, but again, after some digestion of the information, the bulls took control and reversed stocks higher into the close. Yields were down in the futures market and BND, the bond ETF and what we use to track the F-fund, did trade yesterday, and was up sharply. This gain will be incorporated in Tuesday's F-fund share price.
Yesterday's reversal in stocks did have a catalyst however, and that was Fed officials hinting that the rise in bond yields may have helped the Fed do their job in putting the breaks on inflation and that was interpreted as them saying they are done raising interest rates this year.
That erased a morning rally in the dollar, which also helped stocks in afternoon trading.
But here's your weekly reminder that the strength in the dollar has been directly influenced by the Federal Reserve reducing their balance sheet (Quantitative Tightening) and last week it was down another $47 billion. They are on a mission and this could continue to be a head wind for stocks.
The price of oil had a knee-jerk reaction to the violence in the Middle East, but that came on the heals of a severe decline over the last week or so. Declines like this usually don't turn out to be "V" bottoms, so I'd be surprised if it's smooth sailing for oil in the short-term, but given the geopolitical event, it could be "different this time?"
Stocks, bonds, and many other charts have had a big run after Friday's reversal so a little backing and filling could kick in. As you'll see down below, some of the charts are set up near resistance which often turns out in one of two ways -- a reversal back down, or a gap up above the resistance. It's not usually just a quiet reaction.
The S&P 500 (C-fund) has had a nice two-day rally and there's a large open gap above that could lure it higher, but it is also back up against that old neckline of the head and shoulders pattern, and the 20-day EMA. As I talked above above, this could be where it gets swatted back down, or we could get a gap up above the resistance. The reason is because the bulls and bears are betting heavy on their side at this level and whoever wins this battle will likely see some giving up from the other side.
DWCPF (S-fund, small caps) is also at some descending resistance. There's a ton of other resistance above that 1700 area so there's a lot to prove here. The bears have control at least until it gets above 1700 to 1740. Even 1760 looks tough.
The EFA (I-fund) was down slightly yesterday but as we often note, late moves in the US market does not generally get priced in here until the following day. US stocks obviously rallied late yesterday, and the dollar came down late as well so this did better than the chart shows, but we may not know until today.
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
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.
