Stocks tumbled into the close on Friday to end a tumultuous week on Wall Street as we head into this week's important CPI report on Tuesday and the Fed's decision on interest rates on Wednesday. The Dow lost 305-points on the day with most of those losses coming in the final hour of trading. This was on the heels of the PPI report which came in a little hot. The I-fund continues to outperform.
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The PPI - Producer Price Index came in slightly higher than expected before the opening bell on Friday but investors shook that off and did some dip buying, but by the close there was a wave of selling. Perhaps it was tax selling, perhaps it was raising cash in front of this week's important economic releases. Maybe it was profit taking as we saw some evidence in the charts that the bear market rally may be rolling over.
The stronger than expected increase in wholesale prices sent yields and the dollar higher and that added to the pressure on stock prices. Both charts however remain in a downtrend, although both may be looking for support at key levels. The dollar is hanging onto that 200-day moving average by a thread.
One of the biggest stories in recent months has been the rapid decline in the price of oil. On Friday it hit a new 52-week low, and in turn that has sent the price of gasoline down sharply as well. This is obviously good news for consumers who are now paying less at the pump than they have for about a year. This could be a good omen for the CPI report as energy has been one of the driving forces behind inflation this year.
I often bring up this question when we see big moves in oil prices. Is the decline in the price of oil as sign of demand slowing hinting at economic issues, or has it been the increase in supply after the depletion of the US Strategic Petroleum Reserve which is now at a 40 year low?
According to Wikipedia, "The Strategic Petroleum Reserve (SPR) is an emergency stockpile of petroleum maintained by the United States Department of Energy (DOE)."
The reserves will have to be replenished at some point and it could lift prices back up as it would take supply away, but for now the price of oil is down to a new 52-week low and that should help put some extra cash in the pockets of Americans while they do their holiday shopping. Playing playing devil's advocate, would consumers who are spending less on gasoline, be spending more elsewhere thus perhaps adding to the inflationary problem? Just a thought - with nothing to back that up.
The weekly chart of the S&P 500 shows some of the trouble it faces. It hit that descending resistance line like a brick wall and rolled over last week, pushing it back below its 40-week moving average as well. It has now broken the support line off the lows and that could have been the selling point late Friday for those who watch the weekly chart closely.
There's just so much at stake with tomorrow CPI which, and if the Fed doesn't know that price data yet at this point, they will know by Wednesday's FOMC meeting and it could sway them one way of the other. We can see some troubling developments on the charts that should be a concern, but the CPI and / or the Fed could tell us something different that will change everything, so it is very tough to be in the prediction game, and easier to be in a reactive mode with the market direction right now. However, if you are going to try to make some kind of prediction about the CPI, today would be the last day to make changes to your TSP account if needed.
The S&P 500 (C-fund) failed to remain above the 200-day moving average after the Jerome Powell speech pushed it above that MA at the end of November. There's a lot of issues with this chart including that bearish PMO indicator crossover, but it is still holding onto that 50-day EMA and the CPI and Fed will have the power to change the entire outlook depending on what they tell us.
The DWCPF (S-fund) also looks ready to break down as it closed ear the top of that open gap from last month. The surprise move here this week would be a rally, and we know how much the market likes to throw surprises at up, otherwise there's not much to like here.
The EFA (I-fund) has been consolidating in a fairly tight range even while U.S. stocks have been pulling back a little more sharply. There is a lot of room on the downside if this wants to test the lower end of its rising channel, or worse, fill the open gap near 62, but being above its major moving averages, it has certainly been the leader of the TSP funds in recent weeks.
BND (bonds / F-fund) was down sharply on Friday after the stronger than expected PPI report lifted bond yields. Like the I-fund, there is a lot of room on the downside for some digestion, but this looks like dips can be bought as long as it stays above about 72.
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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[TD="width: 338, align: center"] Daily TSP Funds Return
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The PPI - Producer Price Index came in slightly higher than expected before the opening bell on Friday but investors shook that off and did some dip buying, but by the close there was a wave of selling. Perhaps it was tax selling, perhaps it was raising cash in front of this week's important economic releases. Maybe it was profit taking as we saw some evidence in the charts that the bear market rally may be rolling over.
The stronger than expected increase in wholesale prices sent yields and the dollar higher and that added to the pressure on stock prices. Both charts however remain in a downtrend, although both may be looking for support at key levels. The dollar is hanging onto that 200-day moving average by a thread.
One of the biggest stories in recent months has been the rapid decline in the price of oil. On Friday it hit a new 52-week low, and in turn that has sent the price of gasoline down sharply as well. This is obviously good news for consumers who are now paying less at the pump than they have for about a year. This could be a good omen for the CPI report as energy has been one of the driving forces behind inflation this year.
I often bring up this question when we see big moves in oil prices. Is the decline in the price of oil as sign of demand slowing hinting at economic issues, or has it been the increase in supply after the depletion of the US Strategic Petroleum Reserve which is now at a 40 year low?
According to Wikipedia, "The Strategic Petroleum Reserve (SPR) is an emergency stockpile of petroleum maintained by the United States Department of Energy (DOE)."
The reserves will have to be replenished at some point and it could lift prices back up as it would take supply away, but for now the price of oil is down to a new 52-week low and that should help put some extra cash in the pockets of Americans while they do their holiday shopping. Playing playing devil's advocate, would consumers who are spending less on gasoline, be spending more elsewhere thus perhaps adding to the inflationary problem? Just a thought - with nothing to back that up.
The weekly chart of the S&P 500 shows some of the trouble it faces. It hit that descending resistance line like a brick wall and rolled over last week, pushing it back below its 40-week moving average as well. It has now broken the support line off the lows and that could have been the selling point late Friday for those who watch the weekly chart closely.
There's just so much at stake with tomorrow CPI which, and if the Fed doesn't know that price data yet at this point, they will know by Wednesday's FOMC meeting and it could sway them one way of the other. We can see some troubling developments on the charts that should be a concern, but the CPI and / or the Fed could tell us something different that will change everything, so it is very tough to be in the prediction game, and easier to be in a reactive mode with the market direction right now. However, if you are going to try to make some kind of prediction about the CPI, today would be the last day to make changes to your TSP account if needed.
The S&P 500 (C-fund) failed to remain above the 200-day moving average after the Jerome Powell speech pushed it above that MA at the end of November. There's a lot of issues with this chart including that bearish PMO indicator crossover, but it is still holding onto that 50-day EMA and the CPI and Fed will have the power to change the entire outlook depending on what they tell us.
The DWCPF (S-fund) also looks ready to break down as it closed ear the top of that open gap from last month. The surprise move here this week would be a rally, and we know how much the market likes to throw surprises at up, otherwise there's not much to like here.
The EFA (I-fund) has been consolidating in a fairly tight range even while U.S. stocks have been pulling back a little more sharply. There is a lot of room on the downside if this wants to test the lower end of its rising channel, or worse, fill the open gap near 62, but being above its major moving averages, it has certainly been the leader of the TSP funds in recent weeks.
BND (bonds / F-fund) was down sharply on Friday after the stronger than expected PPI report lifted bond yields. Like the I-fund, there is a lot of room on the downside for some digestion, but this looks like dips can be bought as long as it stays above about 72.
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.
