Stocks started the week with a rally, and we've talked often about the strange positive Mondays streak, but here we are again with another Monday rally behind us, and four more trading days left in the week to try to hold onto those gains. We are starting a strong seasonal period for stocks, but it may not be that easy under the current circumstances, although stocks are quite oversold and relief rallies can be impressive. The Dow gained 511-points yesterday as large caps did well, while small caps lagged but still posted a decent gain.
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We have seen a lot of positive Mondays over the last 4 or 5 months, but obviously that hasn't translated into gains for the indices as we are about to close the door on a third month of steep losses for the TSP stock funds.
I know I have been talking a lot about seasonality recently, and maybe too much so since it is not really a primary indicator outside of a few major holidays. However, this chart shows some very distinct tendencies, not only how tough the August through October (actually more mid-October) period is historically, but how strong November and December are historically.
This data from sentimenTrader.com goes all the way back to 1953. The green box depicts the period starting with trading day #208 of the year, which is today, into the end of the year.
Chart provided courtesy of www.sentimentrader.com
And you can see the advantage the bulls have enjoyed as this period is up 76% of the time and, if there was a 5% or larger move (up or down) between day 208 and the end of the year, it was almost 10 to 1 in favor of it being a positive move.
There are no guarantees, and it doesn't mean we won't have a recession, or that we are remaining a bull market, but over the next two months the bulls will have some wind at their backs.
The 10-year Treasury Yield was up a bit yesterday but it was almost a none event, however the dollar was down moderately helping the I-fund tag along with the S&P 500.
The world is still debating the recession situation - hard landing, soft landing, no landing, etc., and with GDP still well into positive territory, the unemployment rate still near all time lows, and no sign of interest rate cuts, there's not a lot of evidence that the economy is struggling. It is assumed however, that the sharp increase in interest rates will have a lagging effect and eventually turn growth negative and push us into a recession.
One thing to keep an eye on is the price of oil and the Dow Transportation Index. Demand for oil will shrink if the economy does slow down, and that generally pushes the price down. The chart of oil below does look suspect right now, but the other component of oil prices is supply, and the war in the Middle East does have the potential to mess with supply, which could keep the price elevated, even if demand does shrink.
The bear flag is a weak sign and for the last 5 days it has had trouble trying to recapture the 50-day EMA (purple.) This is despite the situation in the Middle East. This is good for us as consumers, but it could be a troubling sign for the economy.
The Dow Transportation Index is very economically sensitive, and it is also sensitive to the price of oil since sectors like the airlines and trucking companies' bottom line depends on the price of fuel. On the other hand, higher fuel prices help companies like the railroads who move oil around the country more when demand is high.
The Transports, which are considered one of the major market leaders, were up a impressive 2% yesterday, but however you slice it, the action lately has hardy been bullish. It's downright concerning. At this point a big relief rally would be normal, but how it reacts to a short-term pop will tell us more.
There is an FOMC meeting this week with a Fed decision on interest rates on Wednesday and we will get the October jobs report on Friday.
About half of the S&P 500 companies have reported 3rd quarter earnings now, and the big one, Apple, reports earnings after the bell on Thursday.
The S&P 500 (C-fund) was up sharply at what appears to be a must hold area. It's premature to suggest that this is a low, but with seasonality back on the bulls' side, a move up to the top of the channel in the coming weeks would not be out of the question, but the 200-day EMA may have something to say about that in the 4275 area. The lower lows and lower highs, and overhead moving averages may make it tough to sustain any kind of rally.
DWCPF (S-fund) was up nicely yesterday but it did lag the large cap indices and unlike the S&P 500 chart, it remains below the support of the descending channel so it has more work to do and more resistance to deal with. Higher interest rates do weigh on smaller companies that depend more heavily on debt. If we do see or hear the Fed talk about lowering rates, that's when small caps may finally perk up.
The chart is flirting with some very important long term support in this 1550 - 1575 area.
EFA (I-fund) had a nice day thanks to a dollar that has been due for a pullback, and the recent double top in the UUP gave it that help yesterday.
BND (bonds / F-fund) was down again as it pulled back to test Thursday's lows, and right now the attempt at making a low has a bear flag look to it, so it really needs to get the 69 area to help take that possibility off the table. It's still in a downtrend and bonds have been in a bear market for some time now, and we have to assume it will continue until the chart tells us otherwise. Picking a bottom is fun, but it's tough. I should know - I've been calling for one for a while now - at the July and August lows when it broke above the 50-day EMA, but both failed.
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.
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We have seen a lot of positive Mondays over the last 4 or 5 months, but obviously that hasn't translated into gains for the indices as we are about to close the door on a third month of steep losses for the TSP stock funds.
I know I have been talking a lot about seasonality recently, and maybe too much so since it is not really a primary indicator outside of a few major holidays. However, this chart shows some very distinct tendencies, not only how tough the August through October (actually more mid-October) period is historically, but how strong November and December are historically.
This data from sentimenTrader.com goes all the way back to 1953. The green box depicts the period starting with trading day #208 of the year, which is today, into the end of the year.
Chart provided courtesy of www.sentimentrader.com
And you can see the advantage the bulls have enjoyed as this period is up 76% of the time and, if there was a 5% or larger move (up or down) between day 208 and the end of the year, it was almost 10 to 1 in favor of it being a positive move.
There are no guarantees, and it doesn't mean we won't have a recession, or that we are remaining a bull market, but over the next two months the bulls will have some wind at their backs.
The 10-year Treasury Yield was up a bit yesterday but it was almost a none event, however the dollar was down moderately helping the I-fund tag along with the S&P 500.
The world is still debating the recession situation - hard landing, soft landing, no landing, etc., and with GDP still well into positive territory, the unemployment rate still near all time lows, and no sign of interest rate cuts, there's not a lot of evidence that the economy is struggling. It is assumed however, that the sharp increase in interest rates will have a lagging effect and eventually turn growth negative and push us into a recession.
One thing to keep an eye on is the price of oil and the Dow Transportation Index. Demand for oil will shrink if the economy does slow down, and that generally pushes the price down. The chart of oil below does look suspect right now, but the other component of oil prices is supply, and the war in the Middle East does have the potential to mess with supply, which could keep the price elevated, even if demand does shrink.
The bear flag is a weak sign and for the last 5 days it has had trouble trying to recapture the 50-day EMA (purple.) This is despite the situation in the Middle East. This is good for us as consumers, but it could be a troubling sign for the economy.
The Dow Transportation Index is very economically sensitive, and it is also sensitive to the price of oil since sectors like the airlines and trucking companies' bottom line depends on the price of fuel. On the other hand, higher fuel prices help companies like the railroads who move oil around the country more when demand is high.
The Transports, which are considered one of the major market leaders, were up a impressive 2% yesterday, but however you slice it, the action lately has hardy been bullish. It's downright concerning. At this point a big relief rally would be normal, but how it reacts to a short-term pop will tell us more.
There is an FOMC meeting this week with a Fed decision on interest rates on Wednesday and we will get the October jobs report on Friday.
About half of the S&P 500 companies have reported 3rd quarter earnings now, and the big one, Apple, reports earnings after the bell on Thursday.
The S&P 500 (C-fund) was up sharply at what appears to be a must hold area. It's premature to suggest that this is a low, but with seasonality back on the bulls' side, a move up to the top of the channel in the coming weeks would not be out of the question, but the 200-day EMA may have something to say about that in the 4275 area. The lower lows and lower highs, and overhead moving averages may make it tough to sustain any kind of rally.
DWCPF (S-fund) was up nicely yesterday but it did lag the large cap indices and unlike the S&P 500 chart, it remains below the support of the descending channel so it has more work to do and more resistance to deal with. Higher interest rates do weigh on smaller companies that depend more heavily on debt. If we do see or hear the Fed talk about lowering rates, that's when small caps may finally perk up.
The chart is flirting with some very important long term support in this 1550 - 1575 area.
EFA (I-fund) had a nice day thanks to a dollar that has been due for a pullback, and the recent double top in the UUP gave it that help yesterday.
BND (bonds / F-fund) was down again as it pulled back to test Thursday's lows, and right now the attempt at making a low has a bear flag look to it, so it really needs to get the 69 area to help take that possibility off the table. It's still in a downtrend and bonds have been in a bear market for some time now, and we have to assume it will continue until the chart tells us otherwise. Picking a bottom is fun, but it's tough. I should know - I've been calling for one for a while now - at the July and August lows when it broke above the 50-day EMA, but both failed.
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.
