We continue to see early strength getting sold in the stock market and that has made a mess of some of the charts. Big tech led on the way down yesterday and what has been leading are the 2024 laggards. Bond yields continue to rise and the the new highs in the 10-year yield is making its impact on stocks. A bounce back in the dollar took the steam out of the beaten down I-fund's attempt at a rally.
You can see the latest updated TSP share prices and returns, usually posted daily by 8:30 PM ET here: https://www.tsptalk.com/tsp_share_prices.php
The stock market is a discounting mechanism which means that it is looking down the road at what may impact stocks, not what is happening now or what has already happened. So what is the market seeing? Well, it sees the Fed potentially stopping interest rate cuts. It also see signs that inflation may be heating up again.
I think we have seen the market react to this quite a bit already, but why are bond yields continuing to rise? It may be telling us that the bond market sees a situation where there Fed may actually have to raise interest rates again after several cuts. That may be down the road, but again the stock market is a discounting mechanism pricing in future economic conditions, and if we wait until the bad news comes out, it may be too late to act on it.
I know this couldn't be any more boring, but it is trying to tell us something. The Fed does like to keep the Fed Funds Rate inline with the 2-year Treasury Yield as the bond market is smarter than all of us, and all of them. That being the case, the Fed Funds rate is about 4.5% and the 2-year yield is is just 4.3%. But look at this chart. It does not look like a chart that wants to go down.
That is a bullish inverted head and shoulders pattern within a rising trend. I don't know what it will actually do, but technical analysis 101 tells me it will more likely go higher.
Meanwhile the 10-year Yield Treasury Yield made new highs again yesterday. The good news here is that it is higher than the 2-year so it isn't inverted anymore, but as we talked about a few times over the last couple of years, an unwinding of an inverted yield curve can be a dangerous time for the market as borrowing costs go up. Here is the 10-year yield on multiple time frames. Again, do these look like charts that are about to come down?
I had been pretty bullish around the holidays, and maybe too much so as the Santa Claus rally was basically a dud after the big November gains, but now that we are past the holidays, the charts and indicators come more into focus and some of the market leaders aren't looking so good.
Perhaps they have gotten oversold and are due for a bounce, but even the holidays could hardly get these oversold charts to push much off their lows. Maybe the new year would start a new direction? Well, not really. The best we have seen is some slightly upward sloping action, and that's what forms a bear flag, and we can see those on the Dow Transportation Index ...
... and the Russell 2000 small caps index.
I'm not sold on any position right now, but I am listening to what the market is trying to tell us.
The big tech stocks of the Nasdaq 100 have been holding up rather well in comparison, and perhaps they can spend another year holding up the S&P 500. We do have a bull flag forming on this QQQ chart since the breakdown from that red rising support line so we may have a battle of the flags in the indices. Can this bull flag win the battle over the bear flags in the other charts?
On Thursday the stock market and TSP will be closed in observance of the national day of mourning for Jimmy Carter, so we will take the day off as well.
We'll get the December jobs report on Friday. Estimates are looking for a gain of 154,000 jobs and an unemployment rate of 4.2%.
Admin note: We are offering a discount on our annual subscriptions to new and current subscribers until Jan 18. You can sign up to a new service or add a year or two (in some cases) to your current subscription for 20% off the regular price (or 50% in some cases.) Use this link for more information: TSP Talk - Annual Subscription Sale
The S&P 500 (C-fund) opened higher yesterday but was almost immediate hit with selling and the open gap from Monday was quickly filled in. Like the QQQ chart that I posted above, there is a possible bullish flag on this chart, but now that the new year is here, there could be more of an effort to fill that large post-Election Day gap that was left open. This chart is getting worn down, but it still looks better than the small caps' chart.
DWCPF (S-fund) made a bullish move to start the year but the recent selling was classic bear flag forming action. There is still strong support at the 100-day EMA but if the flag breaks down, it will probably cut right through that support and the downside target would be literally off this chart, so support needs to hold. There is also a small gap still open from post Election Day near 2225.
ACWX (the I-fund tracking index) was down 0.34% yesterday and the I-fund was given a loss of 0.20%. That outperformed the US funds but it also created a negative outside reversal day, which is considered quite bearish. That bear flag is still intact and concerning.
BND (bonds / F-fund) broke down and as bad as this chart looked, I kept expecting yields to rollover, but they haven't yet. The stock and bond markets are trying to tell us something. Is it growth? Inflation? Both?
Thanks so much for reading! We'll see you back here on Friday, after tomorrow's national day of mourning for Jimmy Carter.
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
Questions, comments, or issues with today's commentary? We can discuss it in the Forum.
Daily Market Commentary Archives
For more info our other premium services, please go here... www.tsptalk.com/premiums.php
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.
| Daily TSP Funds Return
More returns |
You can see the latest updated TSP share prices and returns, usually posted daily by 8:30 PM ET here: https://www.tsptalk.com/tsp_share_prices.php
The stock market is a discounting mechanism which means that it is looking down the road at what may impact stocks, not what is happening now or what has already happened. So what is the market seeing? Well, it sees the Fed potentially stopping interest rate cuts. It also see signs that inflation may be heating up again.
I think we have seen the market react to this quite a bit already, but why are bond yields continuing to rise? It may be telling us that the bond market sees a situation where there Fed may actually have to raise interest rates again after several cuts. That may be down the road, but again the stock market is a discounting mechanism pricing in future economic conditions, and if we wait until the bad news comes out, it may be too late to act on it.
I know this couldn't be any more boring, but it is trying to tell us something. The Fed does like to keep the Fed Funds Rate inline with the 2-year Treasury Yield as the bond market is smarter than all of us, and all of them. That being the case, the Fed Funds rate is about 4.5% and the 2-year yield is is just 4.3%. But look at this chart. It does not look like a chart that wants to go down.
That is a bullish inverted head and shoulders pattern within a rising trend. I don't know what it will actually do, but technical analysis 101 tells me it will more likely go higher.
Meanwhile the 10-year Yield Treasury Yield made new highs again yesterday. The good news here is that it is higher than the 2-year so it isn't inverted anymore, but as we talked about a few times over the last couple of years, an unwinding of an inverted yield curve can be a dangerous time for the market as borrowing costs go up. Here is the 10-year yield on multiple time frames. Again, do these look like charts that are about to come down?
I had been pretty bullish around the holidays, and maybe too much so as the Santa Claus rally was basically a dud after the big November gains, but now that we are past the holidays, the charts and indicators come more into focus and some of the market leaders aren't looking so good.
Perhaps they have gotten oversold and are due for a bounce, but even the holidays could hardly get these oversold charts to push much off their lows. Maybe the new year would start a new direction? Well, not really. The best we have seen is some slightly upward sloping action, and that's what forms a bear flag, and we can see those on the Dow Transportation Index ...
... and the Russell 2000 small caps index.
I'm not sold on any position right now, but I am listening to what the market is trying to tell us.
The big tech stocks of the Nasdaq 100 have been holding up rather well in comparison, and perhaps they can spend another year holding up the S&P 500. We do have a bull flag forming on this QQQ chart since the breakdown from that red rising support line so we may have a battle of the flags in the indices. Can this bull flag win the battle over the bear flags in the other charts?
On Thursday the stock market and TSP will be closed in observance of the national day of mourning for Jimmy Carter, so we will take the day off as well.
We'll get the December jobs report on Friday. Estimates are looking for a gain of 154,000 jobs and an unemployment rate of 4.2%.
Admin note: We are offering a discount on our annual subscriptions to new and current subscribers until Jan 18. You can sign up to a new service or add a year or two (in some cases) to your current subscription for 20% off the regular price (or 50% in some cases.) Use this link for more information: TSP Talk - Annual Subscription Sale
The S&P 500 (C-fund) opened higher yesterday but was almost immediate hit with selling and the open gap from Monday was quickly filled in. Like the QQQ chart that I posted above, there is a possible bullish flag on this chart, but now that the new year is here, there could be more of an effort to fill that large post-Election Day gap that was left open. This chart is getting worn down, but it still looks better than the small caps' chart.
DWCPF (S-fund) made a bullish move to start the year but the recent selling was classic bear flag forming action. There is still strong support at the 100-day EMA but if the flag breaks down, it will probably cut right through that support and the downside target would be literally off this chart, so support needs to hold. There is also a small gap still open from post Election Day near 2225.
ACWX (the I-fund tracking index) was down 0.34% yesterday and the I-fund was given a loss of 0.20%. That outperformed the US funds but it also created a negative outside reversal day, which is considered quite bearish. That bear flag is still intact and concerning.
BND (bonds / F-fund) broke down and as bad as this chart looked, I kept expecting yields to rollover, but they haven't yet. The stock and bond markets are trying to tell us something. Is it growth? Inflation? Both?
Thanks so much for reading! We'll see you back here on Friday, after tomorrow's national day of mourning for Jimmy Carter.
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
Questions, comments, or issues with today's commentary? We can discuss it in the Forum.
Daily Market Commentary Archives
For more info our other premium services, please go here... www.tsptalk.com/premiums.php
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.
