Buying the rumor? The bulls have now put together two big days after Monday's sell off, both on fairly light volume. We saw new highs in the S&P 500 heading into today's jobless claims and CPI data - one a gauge of the economy and one inflation. Bond yields resumed their climb higher, sending the F-fund lower, and the dollar also rallied giving the I-fund a stiff headwind.
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The CPI report this morning will most likely come inline with estimates or better than expected (less inflationary) as the trend of positive economic reports continues as we head toward election day. I'd be surprised if it, or the PPI on Friday, show any signs of concern as we get the Goldilocks combination of stronger than expected economic data, while not negatively impacting inflation.
One of the consequences of strong economic data is higher yields, which could result in fewer or lower rate cuts from the Federal Reserve at their November meeting. You can see here that every bond yield, from the 3-month T-bill and longer, moved higher.
It didn't stop the stock market from rallying, but it's a warning sign. We know October is rarely an easy month for stocks, particularly during election years, as we have been talking about for months. But here's a look at the final four months of the previous four presidential election years, highlighting October. All were negative but the wide swings is particularly notable.
By contrast, the first 7 trading days in October this year have been positive for the S&P 500 and the trading range has been quite narrow. Is this year different or will the next three weeks behave more like the norm?
Hong' Kong's Hang Seng Index fell another 1.4% yesterday after the 9.4% plunge the prior day. China's Shanghai Index fell 6.6% yesterday after the big rally they've had over there. So far the Western stock markets haven't reacted negatively to this bearish activity.
While stocks have been relatively flat since the July peak, especially small caps, gold has been on a tear since July. It has recently pulled back to the support line of the ascending trading channel. Is this telling us something? Maybe. Gold is usually a safety trade when stocks are struggling, but that hasn't really been the case. Gold also tends to do well when inflation is a problem, which we know hasn't been the case based on the data over the last year. So what's going on?
If gold bounces off of that support we have to wonder if it is related to the stronger economic picture, higher expected inflation, or is it just the strong demand from central banks around the world? Just another something to keep an eye on.
The price of oil went from over $78 to under $72 in two days, before closing at $73 and change yesterday. It came a long way since $66 at the start of the month, but 200-day EMA could be a roadblock. The stock market probably does not want to see this hitting $80 anytime soon.
Holiday Monday! The TSP will be closed on Monday October 14, for Columbus Day. They will not be processing transactions so we will also take the day off here at TSP Talk.
Admin Note: In the coming weeks we may be working on a server and software upgrade, starting with the forum, that could disrupt the website periodically. I've procrastinated long enough and it's time to get it done. The maintenance could take part or all of the website down at times, but it will not impact Premium Service email and text alerts. I'll keep you posted.
The S&P 500 (C-fund) rallied and closed at a new all time high yesterday. The trading volume was quite low the last two days, which could be a tell, but there was nothing in the headlines to stir emotions, which may be a good thing. Today may be another story as the CPI and jobless claims could shake things up, or produce the high volume rally that may get the underinvested chasing.
DWCPF (S-fund) didn't quite make a new high as the small caps have been lagging since yields started to rise again. Can the economic data this year shake this up enough to attempt to fill that open gap down by 2075, or will the bulls have none of that? The chart looks good, but open gaps can't be totally dismissed.
The I-fund: The EFA was up 0.01% and ACWX was down 0.11%, and the "ex USA ex China ex Hong Kong Index" was up 0.22%. You can see the TSP's eventual final daily price and return posted on our site each evening.
The I-fund was held back again by the recent strength in the dollar.
Tuesday's I-fund price was +0.14% while EFA, ACWX, and the ex USA ex China ex Hong Kong Index were all down, so we're still trying to figure out this mystery.
BND (Bonds / F-fund) was down on another move higher in yields. There is support below and an open gap above, both of which are in play on any surprises from today's economic data.
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
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.html
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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The CPI report this morning will most likely come inline with estimates or better than expected (less inflationary) as the trend of positive economic reports continues as we head toward election day. I'd be surprised if it, or the PPI on Friday, show any signs of concern as we get the Goldilocks combination of stronger than expected economic data, while not negatively impacting inflation.
One of the consequences of strong economic data is higher yields, which could result in fewer or lower rate cuts from the Federal Reserve at their November meeting. You can see here that every bond yield, from the 3-month T-bill and longer, moved higher.
It didn't stop the stock market from rallying, but it's a warning sign. We know October is rarely an easy month for stocks, particularly during election years, as we have been talking about for months. But here's a look at the final four months of the previous four presidential election years, highlighting October. All were negative but the wide swings is particularly notable.
By contrast, the first 7 trading days in October this year have been positive for the S&P 500 and the trading range has been quite narrow. Is this year different or will the next three weeks behave more like the norm?
Hong' Kong's Hang Seng Index fell another 1.4% yesterday after the 9.4% plunge the prior day. China's Shanghai Index fell 6.6% yesterday after the big rally they've had over there. So far the Western stock markets haven't reacted negatively to this bearish activity.
While stocks have been relatively flat since the July peak, especially small caps, gold has been on a tear since July. It has recently pulled back to the support line of the ascending trading channel. Is this telling us something? Maybe. Gold is usually a safety trade when stocks are struggling, but that hasn't really been the case. Gold also tends to do well when inflation is a problem, which we know hasn't been the case based on the data over the last year. So what's going on?
If gold bounces off of that support we have to wonder if it is related to the stronger economic picture, higher expected inflation, or is it just the strong demand from central banks around the world? Just another something to keep an eye on.
The price of oil went from over $78 to under $72 in two days, before closing at $73 and change yesterday. It came a long way since $66 at the start of the month, but 200-day EMA could be a roadblock. The stock market probably does not want to see this hitting $80 anytime soon.
Holiday Monday! The TSP will be closed on Monday October 14, for Columbus Day. They will not be processing transactions so we will also take the day off here at TSP Talk.
Admin Note: In the coming weeks we may be working on a server and software upgrade, starting with the forum, that could disrupt the website periodically. I've procrastinated long enough and it's time to get it done. The maintenance could take part or all of the website down at times, but it will not impact Premium Service email and text alerts. I'll keep you posted.
The S&P 500 (C-fund) rallied and closed at a new all time high yesterday. The trading volume was quite low the last two days, which could be a tell, but there was nothing in the headlines to stir emotions, which may be a good thing. Today may be another story as the CPI and jobless claims could shake things up, or produce the high volume rally that may get the underinvested chasing.
DWCPF (S-fund) didn't quite make a new high as the small caps have been lagging since yields started to rise again. Can the economic data this year shake this up enough to attempt to fill that open gap down by 2075, or will the bulls have none of that? The chart looks good, but open gaps can't be totally dismissed.
The I-fund: The EFA was up 0.01% and ACWX was down 0.11%, and the "ex USA ex China ex Hong Kong Index" was up 0.22%. You can see the TSP's eventual final daily price and return posted on our site each evening.
The I-fund was held back again by the recent strength in the dollar.
Tuesday's I-fund price was +0.14% while EFA, ACWX, and the ex USA ex China ex Hong Kong Index were all down, so we're still trying to figure out this mystery.
BND (Bonds / F-fund) was down on another move higher in yields. There is support below and an open gap above, both of which are in play on any surprises from today's economic data.
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
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.html
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.
