Someone pulled the plug on the market yesterday after a week of a series of strange events. We mentioned Gamestop, as has every other market pundit in the world, but that type of action is starting to spread and the overall market doesn't seem to know what to make of it. The Dow lost 634-points and 2% to 3% losses were seen across the board.
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The Fed didn't have any surprises in their post FOMC meeting press conference, but while Jerome Powell was speaking it seemed like the selling intensified, possibly because the market was looking for another handout that it didn't really hear.
We saw decent numbers in after hours earnings from Apple and Facebook, while Tesla disappointed, but because of the market environment yesterday we didn't see the usually pop in after hours trading. Is that a buying opportunity for some of these high flyers, or is it a sign that there has been a change in character in the market? That's what today's action may tell us.
The index charts that had some cracks, did breakdown more, and some that were still hanging on, are starting to show some cracks so it is getting close to make or break time.
There seems to be some connection with the market giving way yesterday and the these crazy movements in stocks that are heavily shorted by some hedge funds, and whether it's those Reddit chat room traders or just other hedge funds, they are making those shorts pay the price. These are the gains in fours stocks -- just yesterday -- that are getting pushed higher.
Some theories are that these hedge funds that are getting killed on these trades had to sell other positions to cover the losses in these short positions, plus we may be seeing a lot margin calls for those short and losing money in these stocks.
The futures were down again when they opened on Wednesday evening so the selling may not be over yet. It's all a little weird after a relentless rally that just seemed to go too far, but let's not stick a fork in this market just yet. It has been very resilient and would it surprise anyone if the indices were back to new highs next week? I hope that doesn't happen actually. A nice 5% to 10% pullback may be just what those extended charts need right now.
Gamestop was actually down about 25% in after hours trading yesterday after the Reddit forum where these stocks are being discussed was shut down to the public. We'll see how that plays out today. Ironically, or coincidentally, the S&P 500 futures moved about 10-points off their lows after that announcement.
The S&P 500 (C-fund) took a dive yesterday, and depending on how you draw your support and resistance lines, there was a breakdown in the blue channel, while the support held in the red channel. The fact that the S&P 500 futures are down about 25-points while I type this means we could see a test of that purple 50-day EMA today. Whether that holds will be a major pivot point for this market. Right now the S&P is down just 3.1% off the high made just the day before. I'd like to see 5% at least, to give us a little refresh. 10% may be too much to ask, but why not?
The DWCPF (small caps / S-fund) had been up about 35% since before the election so a 10% correction would seem like nothing, but if you are taking that loss in your account, that is obviously something.
The Dow Transportation Index was down nearly 3% yesterday and this has been kind of the canary in the coal mine recently as it has been falling steadily for almost two weeks now. It broke below a support line and its 50-day EMA yesterday.
The EFA (I-fund) lost about what the U.S. indices lost, but the I-fund was given a favorable price with most of the losses in U.S. stocks coming later in the day. The dollar was a catalyst as it rallied 0.62% yesterday.
The dollar did rally, breaking out from that bull flag / pennant formation that we've been watching, but it did run into the 50-day EMA, which can be a rebound killer.
The High Yield Corporate Bonds have been breaking down and flashing a bit of a warning to us, and it may be now looking to the 50-day EMA for support.
The Volatility Index exploded up to 37 yesterday, and that is an eye opener. The recent pops have all closed well below their highs, so seeing this close at its intraday high tells us it is likely to make another move higher again today.
BND (bonds / F-fund) was flat on the day despite yields falling sharply on the 10-year Treasury. So investors weren't really buying bonds (or gold), and that may be a good sign for stocks. Those two are safe havens and so far the money did not go there. Maybe the bond and gold traders were buying Gamestop instead.
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
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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The Fed didn't have any surprises in their post FOMC meeting press conference, but while Jerome Powell was speaking it seemed like the selling intensified, possibly because the market was looking for another handout that it didn't really hear.
We saw decent numbers in after hours earnings from Apple and Facebook, while Tesla disappointed, but because of the market environment yesterday we didn't see the usually pop in after hours trading. Is that a buying opportunity for some of these high flyers, or is it a sign that there has been a change in character in the market? That's what today's action may tell us.
The index charts that had some cracks, did breakdown more, and some that were still hanging on, are starting to show some cracks so it is getting close to make or break time.
There seems to be some connection with the market giving way yesterday and the these crazy movements in stocks that are heavily shorted by some hedge funds, and whether it's those Reddit chat room traders or just other hedge funds, they are making those shorts pay the price. These are the gains in fours stocks -- just yesterday -- that are getting pushed higher.
Some theories are that these hedge funds that are getting killed on these trades had to sell other positions to cover the losses in these short positions, plus we may be seeing a lot margin calls for those short and losing money in these stocks.
The futures were down again when they opened on Wednesday evening so the selling may not be over yet. It's all a little weird after a relentless rally that just seemed to go too far, but let's not stick a fork in this market just yet. It has been very resilient and would it surprise anyone if the indices were back to new highs next week? I hope that doesn't happen actually. A nice 5% to 10% pullback may be just what those extended charts need right now.
Gamestop was actually down about 25% in after hours trading yesterday after the Reddit forum where these stocks are being discussed was shut down to the public. We'll see how that plays out today. Ironically, or coincidentally, the S&P 500 futures moved about 10-points off their lows after that announcement.
The S&P 500 (C-fund) took a dive yesterday, and depending on how you draw your support and resistance lines, there was a breakdown in the blue channel, while the support held in the red channel. The fact that the S&P 500 futures are down about 25-points while I type this means we could see a test of that purple 50-day EMA today. Whether that holds will be a major pivot point for this market. Right now the S&P is down just 3.1% off the high made just the day before. I'd like to see 5% at least, to give us a little refresh. 10% may be too much to ask, but why not?
The DWCPF (small caps / S-fund) had been up about 35% since before the election so a 10% correction would seem like nothing, but if you are taking that loss in your account, that is obviously something.
The Dow Transportation Index was down nearly 3% yesterday and this has been kind of the canary in the coal mine recently as it has been falling steadily for almost two weeks now. It broke below a support line and its 50-day EMA yesterday.
The EFA (I-fund) lost about what the U.S. indices lost, but the I-fund was given a favorable price with most of the losses in U.S. stocks coming later in the day. The dollar was a catalyst as it rallied 0.62% yesterday.
The dollar did rally, breaking out from that bull flag / pennant formation that we've been watching, but it did run into the 50-day EMA, which can be a rebound killer.
The High Yield Corporate Bonds have been breaking down and flashing a bit of a warning to us, and it may be now looking to the 50-day EMA for support.
The Volatility Index exploded up to 37 yesterday, and that is an eye opener. The recent pops have all closed well below their highs, so seeing this close at its intraday high tells us it is likely to make another move higher again today.
BND (bonds / F-fund) was flat on the day despite yields falling sharply on the 10-year Treasury. So investors weren't really buying bonds (or gold), and that may be a good sign for stocks. Those two are safe havens and so far the money did not go there. Maybe the bond and gold traders were buying Gamestop instead.
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
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.
