The dollar and 10-year Treasury yield fell sharply yesterday opening the door for a rally in stocks, which is of course what happened. The Dow gained 337-points making it three days in a row on the upside. The Nasdaq and small caps led with gains of 2.25% and 3% respectively. Unfortunately there was a lot of selling after the bell when Microsoft, Google, and others, reported earnings.
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Weak economic data out of Europe helped trigger the decline in yields and the dollar and we've talked about this before -- what is it going to take to get these to come down in order to stimulate a rally in the stock market? Ironically the answer is weak economic data, which will have its own ramifications.
The 10-year Treasury fell sharply, although it remains above 4.1% and there was no break in the trend.
The dollar did break below a rising support line, but it remains above that key 50-day EMA which has held repeatedly. How long?
The one year chart shows just how important that indicator is to the trend of the dollar, so it's tough to count on that failing at this point unless the economic data and yields continue to get weaker. Although if anyone can do that, it would be the Fed next week if they back off their extremely hawkish monetary policy.
The Dow Transportation Index had a big day yesterday and moved above its key 50-ay EMA, although the last time that happened in September, it flipped back over the following day. That bear flag can't be any more obvious and like moving averages, the investment world sees this and it may take a good headline or two for them to push it up any further. Yesterday's earnings after the bell won't help that cause.
Microsoft and Google (Alphabet) were down 2.9% and 6.7% respectively after hours after releasing earnings. Texas Instruments is not as much of a market mover, but it too was down 5.7% after hours, so we certainly have a headwind to start Wednesday trading.
The S&P 500 (C-fund) rallied another 1.63% yesterday, putting the bear market rally 10.6% off the lows. The index pushed above the key 50-day EMA yesterday, but let's not forget that it did that in September, and that move was over the next day. It's been a good rally and certainly was "playable" but the start to this important series of earnings reports fell short last night so we have to be careful. We still have not seen any capitulation like trading volume so I will keep calling this a bear market rally that will likely eventually fail and lead to lower lows. That doesn't have to happen today, next week, or even this year. We could get a rally up to one of the 200-day moving averages first, but of course it could fail at any time and I see it as inevitable unless something changes like the Fed actually pivots, or something of the like.
The DWCPF (small caps / S-fund) gained 3% yesterday, an amazing move and it too closed above its 50-day EMA. The drop in yields is really appreciate by smaller companies. But there are bear flags on many charts and this one is testing the upper end of one now. Can those two large open gaps get filled before another leg down, or will the bear flag prove to be too formidable? That's the question as we head into next week's interest rate hike.
The EFA (I-fund) was up over 2% and the 1% decline in the dollar helped, but look at that chart. The 50-day EMA and the bearish looking flag has to get your attention.
BND (bonds / F-fund) was also up big yesterday and as we talked about in yesterday's commentary, there is some very long term support in the 69 - 70 area that could trigger a bounce, which the stock market can really use. Now it has to get back above 70.
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 so much 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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Weak economic data out of Europe helped trigger the decline in yields and the dollar and we've talked about this before -- what is it going to take to get these to come down in order to stimulate a rally in the stock market? Ironically the answer is weak economic data, which will have its own ramifications.
The 10-year Treasury fell sharply, although it remains above 4.1% and there was no break in the trend.
The dollar did break below a rising support line, but it remains above that key 50-day EMA which has held repeatedly. How long?
The one year chart shows just how important that indicator is to the trend of the dollar, so it's tough to count on that failing at this point unless the economic data and yields continue to get weaker. Although if anyone can do that, it would be the Fed next week if they back off their extremely hawkish monetary policy.
The Dow Transportation Index had a big day yesterday and moved above its key 50-ay EMA, although the last time that happened in September, it flipped back over the following day. That bear flag can't be any more obvious and like moving averages, the investment world sees this and it may take a good headline or two for them to push it up any further. Yesterday's earnings after the bell won't help that cause.
Microsoft and Google (Alphabet) were down 2.9% and 6.7% respectively after hours after releasing earnings. Texas Instruments is not as much of a market mover, but it too was down 5.7% after hours, so we certainly have a headwind to start Wednesday trading.
The S&P 500 (C-fund) rallied another 1.63% yesterday, putting the bear market rally 10.6% off the lows. The index pushed above the key 50-day EMA yesterday, but let's not forget that it did that in September, and that move was over the next day. It's been a good rally and certainly was "playable" but the start to this important series of earnings reports fell short last night so we have to be careful. We still have not seen any capitulation like trading volume so I will keep calling this a bear market rally that will likely eventually fail and lead to lower lows. That doesn't have to happen today, next week, or even this year. We could get a rally up to one of the 200-day moving averages first, but of course it could fail at any time and I see it as inevitable unless something changes like the Fed actually pivots, or something of the like.
The DWCPF (small caps / S-fund) gained 3% yesterday, an amazing move and it too closed above its 50-day EMA. The drop in yields is really appreciate by smaller companies. But there are bear flags on many charts and this one is testing the upper end of one now. Can those two large open gaps get filled before another leg down, or will the bear flag prove to be too formidable? That's the question as we head into next week's interest rate hike.
The EFA (I-fund) was up over 2% and the 1% decline in the dollar helped, but look at that chart. The 50-day EMA and the bearish looking flag has to get your attention.
BND (bonds / F-fund) was also up big yesterday and as we talked about in yesterday's commentary, there is some very long term support in the 69 - 70 area that could trigger a bounce, which the stock market can really use. Now it has to get back above 70.
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 so much 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.
