Stocks opened higher on Thursday after another favorable PPI report - favorable as far as being less inflationary than expected, and a cool weekly jobless claims report helped as well. The initial reaction in the futures was a strong move higher but by the time the market opened the rally lost its steam, and that weakness continued until about lunchtime when we did see some dip buying. Small caps and the I-fund lagged badly again, and bonds rallied on a pullback in yields.
[TABLE="align: center"]
[TR]
[TD="align: center"]
[/TD]
[TD]
[/TD]
[TD="width: 283, align: center"] Daily TSP Funds Return
[TABLE="align: center"]
[TR]
[TD="align: right"][/TD]
[/TR]
[/TABLE]
[/TD]
[/TR]
[/TABLE]
The advance / decline numbers were decisively negative with nearly 2 stocks down for each one that was up on both the NYSE and the Nasdaq, but of course big tech pushed the S&P 500 and Nasdaq into positive territory. Moreover, if Nvidia (+3.5%) and Broadcom (+12.3%) had each been flat instead of up, both the S&P and Naz would have been negative.
The PPI Report (Producer Price Index) came in very favorable to the inflation story, hence the rate cut story. That, along with the weekly jobless claims, sent the 10-year Treasury Yield lower yesterday, giving bonds and the F-fund a boost.
On the other hand, the dollar did not follow suit as we saw it bounce back from Wednesday's loss, filling in its gap, and perhaps that's all the rally intended to do. This move higher gave the I-fund a punch in the gut yesterday.
The small caps (Russell 2000) did not react the way that it had been this year, that is they tend to do well when yields are moving lower. On a bullish note, the pullback yesterday filled in the open gap from Wednesday, where it found some support and closed off its lows, but not without posting a near 1% loss. Same the for S-fund's DWCPF which will be posted in the lower section.
The Transports were again laggards yesterday and the chart continues to look like it is in trouble if the 14,800 area breaks. This index is called the market leader and that's not good news considering the chart formation. But do the Transports really matter to the rest of the market?
I may go back and look at other years but I grabbed this chart of the Transports and the S&P 500 from 1998 to 2001. For several months in 1999 into 2000 the Transports were plummeting, while the dot com bubble was inflating and pushing the S&P 500 (and of course the Nasdaq) up the whole time.
You can see that the S&P 500 did finally peak as the Transports were bottoming, and the stock market, tech and all, started to do what the Transports had done the year before.
So, at least in this situation, the answer is yes -- the Transports do tend to lead the rest of the stock market. That's not great news, but we also saw that the divergence can last for almost a year before stocks feel the impact.
The S&P 500 (C-fund) was up slightly with most of the heavy lifting coming from just a few stocks again. Who knows how long this can continue, but it has been that way all year as we watch small caps lag this index by about 12%. The open gap could get filled soon, and that wouldn't be a bad thing, but for the bulls, holding above the breakout line if that gap does get filled, would be ideal.
The DWCPF (S-fund) got slammed yesterday despite another move lower in yields. Investors seemed more worried about possible slowing economic conditions than lower interest rates. Technically, the gap was filled and and held, and it remains above its breakout line so there's some reason to be optimistic. 2000 - 1990 area really needs to hold on a closing basis. You can see that the support goes back a while.
The EFA (I-fund) was hit hard as the rising dollar put a big dent in this fund yesterday. The rally in the dollar filled an open gap and maybe that's all yesterday's move was about, and that 50-day EMA is holding for a second day so again, some hope as the chart doesn't look bad.
BND (bonds / F-fund) had another nice rally and it wanted nothing to do with filling the big gap from Wednesday as both the CPI and PPI, as well as the jobless claims reports, were favorable to bonds as yield fells. There's some overhead resistance in that red channel, but it is rising resistance.
Thanks so much for reading! Have a great weekend!
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
For more info our other premium services, please go here... www.tsptalk.com/premiums.html
Daily Market Commentary Archives
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.
[TABLE="align: center"]
[TR]
[TD="align: center"]
[TD]
[/TD]
[TD="width: 283, align: center"] Daily TSP Funds Return
[TR]
[TD="align: right"][/TD]
[/TR]
[/TABLE]
[/TD]
[/TR]
[/TABLE]
The advance / decline numbers were decisively negative with nearly 2 stocks down for each one that was up on both the NYSE and the Nasdaq, but of course big tech pushed the S&P 500 and Nasdaq into positive territory. Moreover, if Nvidia (+3.5%) and Broadcom (+12.3%) had each been flat instead of up, both the S&P and Naz would have been negative.
The PPI Report (Producer Price Index) came in very favorable to the inflation story, hence the rate cut story. That, along with the weekly jobless claims, sent the 10-year Treasury Yield lower yesterday, giving bonds and the F-fund a boost.
On the other hand, the dollar did not follow suit as we saw it bounce back from Wednesday's loss, filling in its gap, and perhaps that's all the rally intended to do. This move higher gave the I-fund a punch in the gut yesterday.
The small caps (Russell 2000) did not react the way that it had been this year, that is they tend to do well when yields are moving lower. On a bullish note, the pullback yesterday filled in the open gap from Wednesday, where it found some support and closed off its lows, but not without posting a near 1% loss. Same the for S-fund's DWCPF which will be posted in the lower section.
The Transports were again laggards yesterday and the chart continues to look like it is in trouble if the 14,800 area breaks. This index is called the market leader and that's not good news considering the chart formation. But do the Transports really matter to the rest of the market?
I may go back and look at other years but I grabbed this chart of the Transports and the S&P 500 from 1998 to 2001. For several months in 1999 into 2000 the Transports were plummeting, while the dot com bubble was inflating and pushing the S&P 500 (and of course the Nasdaq) up the whole time.
You can see that the S&P 500 did finally peak as the Transports were bottoming, and the stock market, tech and all, started to do what the Transports had done the year before.
So, at least in this situation, the answer is yes -- the Transports do tend to lead the rest of the stock market. That's not great news, but we also saw that the divergence can last for almost a year before stocks feel the impact.
The S&P 500 (C-fund) was up slightly with most of the heavy lifting coming from just a few stocks again. Who knows how long this can continue, but it has been that way all year as we watch small caps lag this index by about 12%. The open gap could get filled soon, and that wouldn't be a bad thing, but for the bulls, holding above the breakout line if that gap does get filled, would be ideal.
The DWCPF (S-fund) got slammed yesterday despite another move lower in yields. Investors seemed more worried about possible slowing economic conditions than lower interest rates. Technically, the gap was filled and and held, and it remains above its breakout line so there's some reason to be optimistic. 2000 - 1990 area really needs to hold on a closing basis. You can see that the support goes back a while.
The EFA (I-fund) was hit hard as the rising dollar put a big dent in this fund yesterday. The rally in the dollar filled an open gap and maybe that's all yesterday's move was about, and that 50-day EMA is holding for a second day so again, some hope as the chart doesn't look bad.
BND (bonds / F-fund) had another nice rally and it wanted nothing to do with filling the big gap from Wednesday as both the CPI and PPI, as well as the jobless claims reports, were favorable to bonds as yield fells. There's some overhead resistance in that red channel, but it is rising resistance.
Thanks so much for reading! Have a great weekend!
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
For more info our other premium services, please go here... www.tsptalk.com/premiums.html
Daily Market Commentary Archives
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.
