If you like crazy mixed up action, you got it on Thursday. The continued reaction to Fed's tapering comments saw stocks all over the place yesterday. The Nasdaq rallied big, while the Transports and the small caps of the Russell 2000 and got beaten down. The S-fund held up well despite the big loss in the Russell 2000. The S&P 500 was flat while the Dow lost 210. The dollar rallied and yields dropped. I saw what was happening and get the gist of it, but exactly why some things were happening was above my pay grade.
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The inflation / disinflation scramble was on after the Fed admitted inflation issues and said they may need to raise rates. But again, why yields were down sharply yesterday, I don't get. Yes, the dollar being up makes sense. Commodities being down because of that, makes sense. The questions is, will this new trend continue or is everyone just going to fade this move in the coming days?
Today is a big expiration date for options and futures contract and seeing the S&P 500 still hanging around that 4200 level probably means there is a lot of positions on both sides of that number but once we get past that expiration we could see a big move in one direction or the other... next week.
The rally in the dollar over the last few days basically took away about two months of losses.
And of course the dollar exploding puts pressure on prices almost across the board, especially in commodities and metals. Copper has been tumbling since the dollar stabilized, and the negative reversal in lumber over the last month has been extraordinary.
Gold and silver... pounded!
The yield on the 10-year Treasury gave back most of its gains from Wednesday, for whatever reason, and I'm sure there is one. Like I've said often, the bond market is a little tough to understand sometimes.
Bottom line: Perhaps the inflation and rotation situation changed after the Fed meeting yesterday - or it's just a little trading and things will settle back in the opposite direction. This is either a new trend, or just interesting trading opportunities, but it's probably not something for Joe and Jane six-pack can figure out. For me, the market has needed a pullback or correction and if this helps bring it along, I'm all for it. If stocks just continue higher, I will just scratch my head and watch in frustration.
[TD="width: 725"] Admin note: The Last Look Report is now a premium service. Thanks to everyone who has subscribed!
The Last Look Report Info
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The S&P 500 (C-fund) was basically flat on what felt like a bad day for stocks, but it depended where you were looking. That "F" flag (blue) broke down on Wednesday and it is still below it so that's a bit of a warning sign, but it is still above all of the major moving averages as the 20-day EMA held again on a closing basis. There is other support down below between the current level and that open gap down by 4025.
The DWCPF (S-fund) held up rather well considering the sell off that we saw in the S&P 500. It's not the best looking formation with that pullback off the resistance line. I'd be more optimistic about it if looked more like a bull flag, but instead it is a steeper decline than a normal bull flag and looks more like the peak April.
The EFA (I-fund) was down and for a second straight day I would have thought this would have lost more given another 0.8% rally in the dollar. Is a test of the 50-day coming again?
The Dow Transportation Index started the week looking over a precipice and yesterday it fell over that precipice - and the 50-day EMA. Not good.
BND (bonds / F-fund) rallied sharply yesterday. Why? That's a good question. I know you come here to perhaps get some answers but I even heard Mike Santolli on CNBC try to explain this, and I still didn't understand. It could be that it was just some trading in a day before an expiration day. Or it could be that the bond traders see something the rest of us don't.
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
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Thanks 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 inflation / disinflation scramble was on after the Fed admitted inflation issues and said they may need to raise rates. But again, why yields were down sharply yesterday, I don't get. Yes, the dollar being up makes sense. Commodities being down because of that, makes sense. The questions is, will this new trend continue or is everyone just going to fade this move in the coming days?
Today is a big expiration date for options and futures contract and seeing the S&P 500 still hanging around that 4200 level probably means there is a lot of positions on both sides of that number but once we get past that expiration we could see a big move in one direction or the other... next week.
The rally in the dollar over the last few days basically took away about two months of losses.
And of course the dollar exploding puts pressure on prices almost across the board, especially in commodities and metals. Copper has been tumbling since the dollar stabilized, and the negative reversal in lumber over the last month has been extraordinary.
Gold and silver... pounded!
The yield on the 10-year Treasury gave back most of its gains from Wednesday, for whatever reason, and I'm sure there is one. Like I've said often, the bond market is a little tough to understand sometimes.
Bottom line: Perhaps the inflation and rotation situation changed after the Fed meeting yesterday - or it's just a little trading and things will settle back in the opposite direction. This is either a new trend, or just interesting trading opportunities, but it's probably not something for Joe and Jane six-pack can figure out. For me, the market has needed a pullback or correction and if this helps bring it along, I'm all for it. If stocks just continue higher, I will just scratch my head and watch in frustration.
[TD="width: 725"] Admin note: The Last Look Report is now a premium service. Thanks to everyone who has subscribed!
The Last Look Report Info
[/TD]
The S&P 500 (C-fund) was basically flat on what felt like a bad day for stocks, but it depended where you were looking. That "F" flag (blue) broke down on Wednesday and it is still below it so that's a bit of a warning sign, but it is still above all of the major moving averages as the 20-day EMA held again on a closing basis. There is other support down below between the current level and that open gap down by 4025.
The DWCPF (S-fund) held up rather well considering the sell off that we saw in the S&P 500. It's not the best looking formation with that pullback off the resistance line. I'd be more optimistic about it if looked more like a bull flag, but instead it is a steeper decline than a normal bull flag and looks more like the peak April.
The EFA (I-fund) was down and for a second straight day I would have thought this would have lost more given another 0.8% rally in the dollar. Is a test of the 50-day coming again?
The Dow Transportation Index started the week looking over a precipice and yesterday it fell over that precipice - and the 50-day EMA. Not good.
BND (bonds / F-fund) rallied sharply yesterday. Why? That's a good question. I know you come here to perhaps get some answers but I even heard Mike Santolli on CNBC try to explain this, and I still didn't understand. It could be that it was just some trading in a day before an expiration day. Or it could be that the bond traders see something the rest of us don't.
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
To get weekly or daily notifications when we post new commentary, sign up HERE.
Thanks 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.
