Stocks opened the new week higher, lost the gains, then came back to close fairly strongly, although the indices were mixed with the Dow, small caps, and the Transportation Index either down or flat. Yields moved up again and the small caps tend to feel more pain from higher rates. The dollar was down a bit so the I-fund managed a decent gain as well, but the big winners yesterday were the S&P 500, and more emphatically, the Nasdaq.
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That's now eight positive Mondays in a row for the S&P 500 and, despite that there have only been four positive days in August all month, three of them have been Mondays. So that may add up to trouble for the rest of the week, unless something is about to change.
It is a post-options expiration week and they tend to have a negative bias, although it is more of a fade of the options expiration week action, so last week's options expiration week losses could be setting up a positive week for stocks this week. That's all tendencies and nothing set in stone. We're still in a short-term downtrend and barely hanging onto the support of key moving averages.
Again, higher yields were the main headline, but for the first time in a while we got a rally in the S&P 500 and Nasdaq despite another good sized move up in the Yield of the 10-year Treasury to 4.34%. The 2-year Treasury Yield (not shown) moved back above 5% yesterday.
The yield is at its highest point since 2007, and that has now helped push 30-year mortgage rate to a 23+ year high of 7.6%, and the average car loan is at 14%. The way prices have gone up on housing and autos, it's a wonder consumers are still buying both at the rate they are (no pun intended.)
The dollar was down a bit yesterday but that small loss pushed it below the resistance of the 2023 upper trading channel, leaving it with a lot of empty space below to the bottom of that channel.
If we zoom out, the channel is actually looking more like giant bear flag. That would make things very interesting if the flag broke down as a bear flag often does. Stocks overall, and especially the I-fund, could be given a huge boost if this does head to the bottom of the flag, but there's no law that these bear flag have to break down. It's just an historically strong tendency.
The Jackson Hole symposium is on Friday and Fed Chair Jerome Powell will be speaking so it could be this week's focus and catalyst, although maybe even more important is the earnings report from Nvidia which will come out after the bell on Wednesday. It ignited the bull market rally after reporting in late May. Now, after peaking in July, it has consolidated quite a bit and so far successfully tested its 50-day EMA.
A weaker than expected report could be a disaster for the overall market, especially tech, which is counting on the A-I leader to perform and expectations are already high. Yesterday it rallied 8.5% in front of this week's earnings making it even more nerve-racking since I always feel like big moves before news are designed to get investors leaning the wrong way. I hope I'm wrong about that.
If bond yields continue higher it may get tougher for any relief rally in stocks to have any staying power, but any pullback relief from those high yields could ignite a strong bounce off the recent lows in stocks, which had gotten very oversold in the short-term. If that happens, then the bulls could have another battle against the "sell the rips" crowd.
The S&P 500 (C-fund) found some support on Friday and the positive reversal day did follow-through on Monday and the rally was able to push it back into that descending trading channel. The top of that channel and the 50-day EMA are both moving lower so it wouldn't take much more upside to test those key levels.
DWCPF (S-fund) was up, but that's about the best I could say as the small caps were weighed down again by higher yields. Technically, the 200-day EMA holding is no small matter and could be the deciding factor for investors wondering if they should buy this dip. The longer that holds, the more interest there will be.
EFA (I-fund) had a nice pop but it barely registered on the chart after the precipitous decline off the late July highs. I talked about the dollar above and if that resistance on the UUP chart I posted can hold, there could be some quick buying in the international stocks. However, a breakout to new highs from the dollar would deflate that enthusiasm.
BND (Bonds / F-fund) fell again as support failed with yields rallying again, and that's not a good sign for bonds or the stock market. This is either a major warning of a possible bond market breakdown, or a great buying opportunity for bonds. Who wants to make that call?
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.
Like what you're seeing on TSP Talk? Why not Tell a Friend about us? We'd really appreciate it, and they may too.
Thanks!
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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That's now eight positive Mondays in a row for the S&P 500 and, despite that there have only been four positive days in August all month, three of them have been Mondays. So that may add up to trouble for the rest of the week, unless something is about to change.
It is a post-options expiration week and they tend to have a negative bias, although it is more of a fade of the options expiration week action, so last week's options expiration week losses could be setting up a positive week for stocks this week. That's all tendencies and nothing set in stone. We're still in a short-term downtrend and barely hanging onto the support of key moving averages.
Again, higher yields were the main headline, but for the first time in a while we got a rally in the S&P 500 and Nasdaq despite another good sized move up in the Yield of the 10-year Treasury to 4.34%. The 2-year Treasury Yield (not shown) moved back above 5% yesterday.
The yield is at its highest point since 2007, and that has now helped push 30-year mortgage rate to a 23+ year high of 7.6%, and the average car loan is at 14%. The way prices have gone up on housing and autos, it's a wonder consumers are still buying both at the rate they are (no pun intended.)
The dollar was down a bit yesterday but that small loss pushed it below the resistance of the 2023 upper trading channel, leaving it with a lot of empty space below to the bottom of that channel.
If we zoom out, the channel is actually looking more like giant bear flag. That would make things very interesting if the flag broke down as a bear flag often does. Stocks overall, and especially the I-fund, could be given a huge boost if this does head to the bottom of the flag, but there's no law that these bear flag have to break down. It's just an historically strong tendency.
The Jackson Hole symposium is on Friday and Fed Chair Jerome Powell will be speaking so it could be this week's focus and catalyst, although maybe even more important is the earnings report from Nvidia which will come out after the bell on Wednesday. It ignited the bull market rally after reporting in late May. Now, after peaking in July, it has consolidated quite a bit and so far successfully tested its 50-day EMA.
A weaker than expected report could be a disaster for the overall market, especially tech, which is counting on the A-I leader to perform and expectations are already high. Yesterday it rallied 8.5% in front of this week's earnings making it even more nerve-racking since I always feel like big moves before news are designed to get investors leaning the wrong way. I hope I'm wrong about that.
If bond yields continue higher it may get tougher for any relief rally in stocks to have any staying power, but any pullback relief from those high yields could ignite a strong bounce off the recent lows in stocks, which had gotten very oversold in the short-term. If that happens, then the bulls could have another battle against the "sell the rips" crowd.
The S&P 500 (C-fund) found some support on Friday and the positive reversal day did follow-through on Monday and the rally was able to push it back into that descending trading channel. The top of that channel and the 50-day EMA are both moving lower so it wouldn't take much more upside to test those key levels.
DWCPF (S-fund) was up, but that's about the best I could say as the small caps were weighed down again by higher yields. Technically, the 200-day EMA holding is no small matter and could be the deciding factor for investors wondering if they should buy this dip. The longer that holds, the more interest there will be.
EFA (I-fund) had a nice pop but it barely registered on the chart after the precipitous decline off the late July highs. I talked about the dollar above and if that resistance on the UUP chart I posted can hold, there could be some quick buying in the international stocks. However, a breakout to new highs from the dollar would deflate that enthusiasm.
BND (Bonds / F-fund) fell again as support failed with yields rallying again, and that's not a good sign for bonds or the stock market. This is either a major warning of a possible bond market breakdown, or a great buying opportunity for bonds. Who wants to make that call?
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.
Like what you're seeing on TSP Talk? Why not Tell a Friend about us? We'd really appreciate it, and they may too.
Thanks!
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.
