It was a poor morning for most stocks yesterday, particularly small caps, but there was a reasonable rebound as the day wore on and most of the indices closed well off the early lows, so once again it didn't take the dip buyers long to jump on the most minute opportunity. The Dow lost just over 200-points,while the Nasdaq closed in positive territory, the small caps lagged, and the S&P 500 closed with a modest loss snapping a 7-day winning streak.
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It was another post-jobs report sell off, after the bulls couldn't help themselves but to buy during any release of economic data, good or bad. But the strangest thing that is going on is the drop in bond yields.
Once again yields were down as the 10-year Treasury Yield fell below 1.4% to 1.37% - the lowest close since February. We can see this chart nearing its 200-day EMA, which could be the target, although there is also an open gap near 1.2%. The reason this is meaningful is because it doesn't seem to jive with the pace of the economic growth, so it seems like there may be something else in play.
After a market sells off it's common to go back and see if we could have seen anything what would have warned us. I have mentioned this before, but in 2020 the the new highs in February were not being met with higher highs in the momentum type of indicators, signaling that something could be wrong. Whether it was COVID insiders dumping stocks before the rest of us knew what was about to hit the world, I don't know, but that minor negative divergence was there, and it turned out to be a warning.
Now we see yields tanking while the economy is growing quickly, which is a warning of some sort, I would assume, but also that same momentum indicator which was hitting new highs along with the S&P 500 back in April and maybe into early May, is now lagging badly as the S&P soars to new highs while the PMO indicator remains about half of what it was a coupe of months ago.
Whether it will pan out into something serious, I don't know, but if it does, we can't say we weren't warned.
The S&P 500 (C-fund) actually made a new high at one point on Tuesday before things flipped over to the downside. There was some afternoon buying so we know where the dip buyers were. The question is, what are the bears doing, and what are they waiting for? We do see some signs of internal problems but the bears have not been able to do anything about it of late. I didn't mark it, but there was a small open gap at Friday's open below 4325, that did get filled yesterday.
The DWCPF (S-fund) had a bad day but closed well off the lows and saved itself from a technical breakdown by closing above that rising support line. It did close below the recent highs so we could see the bears did put on some downside pressure, but as I just said, they've gone missing lately.
The Transportation Index broke below its bear flag in early trading but closed strongly and off the lows to pull back into the flag. It is still below the 50-day EMA so that is clear resistance at this point.
The EFA (I-fund) was down as the dollar rallied, and this time it did close back below its 50-day EMA. That broken down bear flag may be part of another small bear flag.
BND (bonds / F-fund) rallied again, and as I keep saying, why yields are falling so much is above my pay grade. We did see a significant change in the technical picture as the open gap finally got filled (orange) as it gapped up above the top of that blue trading channel's resistance line. It also opened another small gap (red.)
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. We'll see you back here tomorrow.
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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It was another post-jobs report sell off, after the bulls couldn't help themselves but to buy during any release of economic data, good or bad. But the strangest thing that is going on is the drop in bond yields.
Once again yields were down as the 10-year Treasury Yield fell below 1.4% to 1.37% - the lowest close since February. We can see this chart nearing its 200-day EMA, which could be the target, although there is also an open gap near 1.2%. The reason this is meaningful is because it doesn't seem to jive with the pace of the economic growth, so it seems like there may be something else in play.
After a market sells off it's common to go back and see if we could have seen anything what would have warned us. I have mentioned this before, but in 2020 the the new highs in February were not being met with higher highs in the momentum type of indicators, signaling that something could be wrong. Whether it was COVID insiders dumping stocks before the rest of us knew what was about to hit the world, I don't know, but that minor negative divergence was there, and it turned out to be a warning.
Now we see yields tanking while the economy is growing quickly, which is a warning of some sort, I would assume, but also that same momentum indicator which was hitting new highs along with the S&P 500 back in April and maybe into early May, is now lagging badly as the S&P soars to new highs while the PMO indicator remains about half of what it was a coupe of months ago.
Whether it will pan out into something serious, I don't know, but if it does, we can't say we weren't warned.
The S&P 500 (C-fund) actually made a new high at one point on Tuesday before things flipped over to the downside. There was some afternoon buying so we know where the dip buyers were. The question is, what are the bears doing, and what are they waiting for? We do see some signs of internal problems but the bears have not been able to do anything about it of late. I didn't mark it, but there was a small open gap at Friday's open below 4325, that did get filled yesterday.
The DWCPF (S-fund) had a bad day but closed well off the lows and saved itself from a technical breakdown by closing above that rising support line. It did close below the recent highs so we could see the bears did put on some downside pressure, but as I just said, they've gone missing lately.
The Transportation Index broke below its bear flag in early trading but closed strongly and off the lows to pull back into the flag. It is still below the 50-day EMA so that is clear resistance at this point.
The EFA (I-fund) was down as the dollar rallied, and this time it did close back below its 50-day EMA. That broken down bear flag may be part of another small bear flag.
BND (bonds / F-fund) rallied again, and as I keep saying, why yields are falling so much is above my pay grade. We did see a significant change in the technical picture as the open gap finally got filled (orange) as it gapped up above the top of that blue trading channel's resistance line. It also opened another small gap (red.)
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. We'll see you back here tomorrow.
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.
