Stocks opened sharply lower on Monday morning after the A-I fiasco over the weekend blindsided Wall Street. It was a very odd day of trading with the Dow gaining nearly 300-points, the Nasdaq losing 3%, the Transportation Index was up 1.5%, and small caps actually rallied early, then fell behind later in the day. Yields were down sharply as concerns over economic weakness were heightened over this tech news.
You can see the latest updated TSP share prices and returns, usually posted daily by 8:30 PM ET here: https://www.tsptalk.com/tsp_share_prices.php
We came into this week almost 100% focused on the Fed meeting, Mag 7 earnings, and the PCE Prices inflation report, but someone threw a wrench into the already hectic week for the stock market.
If you never heard of DeepSeek, you are not alone. It's a new Chinese AI Company that started to pop up in news headlines over the weekend, and I didn't even look them up until I saw what their technology news was doing to the futures on Sunday evening.
From an unsophisticated, naïve A-I tech person, it sounds like Deepseek was able to create an A-I bot similar to ChatGPT or Gemini, and did so with much cheaper CPU processing. Meanwhile US companies have been investing heavily in the Nvidia chips and suddenly there is a new way for apps to run without the same expense. Here's what happened to Nvidia's stock, one of the most widely held stocks in many indices and ETFs around the world. Was this an overreaction?
The 10-year Treasury Yield fell sharply and bonds could have been used as a safe haven. For a long time, it was typical to see bonds rally on a day that stocks were down sharply. Bond prices go up when yields come down so in more recent years it was lower yields and higher bond prices that lifted the stock market because we had become so sensitive to the course of inflation.
We talked about this head and shoulders pattern yesterday and the right shoulder did form. Now we wait to see in the neckline near 4.5% holds that support or not.
Again, lower yields mean higher bond prices (BND), which helped the F-fund to a nice day.
It was an odd day in many ways. Small caps gapped down in sympathy with the S&P 500, but within a few minutes the Russell 2000 battled back and moved into positive territory while the S&P was still sitting near its lows of the day. The S&P then stabilized and small caps drifted lower all day.
And the Dow Transportation Index gained 1.46%, as it broke out above its recent highs, so it was interesting action to say the least.
We're still looking forward to the Fed's meeting, the four Mag 7 earnings reports this week, and the PCE inflation report, but suddenly we have another catalyst to worry about.
The S&P 500 (C-fund) gapped open sharply lower on Monday and that was a chart killer. Well, maybe not a killer yet but a staller for sure as the breakout is dead. A double top pullback, and a bull flag that comes back to test the top of the flag is all normal action. We just don't usually see it all happen in one day, so it may be too optimistic to believe this is over already. However, there's solid support near 5950 and two of the open gaps (blue) were filled on the downside with yesterday's range.
Volume was elevated so the positive reversal off the lows may be legitimate, although it could come back down to test those lows, even if we are near a bottom already.
DWCPF (S-fund) fell apart in late morning trading despite the favorable decline in bond yields. It was that fear of decreased tech spending and an economic slowdown that eventually took the small caps down. It's back in the bearish looking flag after the breakout failed. Two gaps were filled here as well, but there are a couple more below.
ACWX (the I-fund tracking index) continues to hold up well, even during yesterday's tech sell off. The dollar was even positive on the day, but that didn't stop this chart from holding at the top of the trading channel it busted through last week.
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.
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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.
| Daily TSP Funds Return
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You can see the latest updated TSP share prices and returns, usually posted daily by 8:30 PM ET here: https://www.tsptalk.com/tsp_share_prices.php
We came into this week almost 100% focused on the Fed meeting, Mag 7 earnings, and the PCE Prices inflation report, but someone threw a wrench into the already hectic week for the stock market.
If you never heard of DeepSeek, you are not alone. It's a new Chinese AI Company that started to pop up in news headlines over the weekend, and I didn't even look them up until I saw what their technology news was doing to the futures on Sunday evening.
From an unsophisticated, naïve A-I tech person, it sounds like Deepseek was able to create an A-I bot similar to ChatGPT or Gemini, and did so with much cheaper CPU processing. Meanwhile US companies have been investing heavily in the Nvidia chips and suddenly there is a new way for apps to run without the same expense. Here's what happened to Nvidia's stock, one of the most widely held stocks in many indices and ETFs around the world. Was this an overreaction?
The 10-year Treasury Yield fell sharply and bonds could have been used as a safe haven. For a long time, it was typical to see bonds rally on a day that stocks were down sharply. Bond prices go up when yields come down so in more recent years it was lower yields and higher bond prices that lifted the stock market because we had become so sensitive to the course of inflation.
We talked about this head and shoulders pattern yesterday and the right shoulder did form. Now we wait to see in the neckline near 4.5% holds that support or not.
Again, lower yields mean higher bond prices (BND), which helped the F-fund to a nice day.
It was an odd day in many ways. Small caps gapped down in sympathy with the S&P 500, but within a few minutes the Russell 2000 battled back and moved into positive territory while the S&P was still sitting near its lows of the day. The S&P then stabilized and small caps drifted lower all day.
And the Dow Transportation Index gained 1.46%, as it broke out above its recent highs, so it was interesting action to say the least.
We're still looking forward to the Fed's meeting, the four Mag 7 earnings reports this week, and the PCE inflation report, but suddenly we have another catalyst to worry about.
The S&P 500 (C-fund) gapped open sharply lower on Monday and that was a chart killer. Well, maybe not a killer yet but a staller for sure as the breakout is dead. A double top pullback, and a bull flag that comes back to test the top of the flag is all normal action. We just don't usually see it all happen in one day, so it may be too optimistic to believe this is over already. However, there's solid support near 5950 and two of the open gaps (blue) were filled on the downside with yesterday's range.
Volume was elevated so the positive reversal off the lows may be legitimate, although it could come back down to test those lows, even if we are near a bottom already.
DWCPF (S-fund) fell apart in late morning trading despite the favorable decline in bond yields. It was that fear of decreased tech spending and an economic slowdown that eventually took the small caps down. It's back in the bearish looking flag after the breakout failed. Two gaps were filled here as well, but there are a couple more below.
ACWX (the I-fund tracking index) continues to hold up well, even during yesterday's tech sell off. The dollar was even positive on the day, but that didn't stop this chart from holding at the top of the trading channel it busted through last week.
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.php
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.
