Stocks gapped up on Thursday morning after the favorable PCE / Income and Spending reports came out before the opening bell. The gap was quickly filled soon afterward and then the bulls went on their merry way into the close. The Nasdaq led as the AI headlines keep tech hot. The I-fund lagged - probably because of the late push higher in US stocks that did not get priced into the overseas markets. Bonds were up as yields dipped on the PCE data.
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The tame inflationary data gave the stock market a reason to rally as yields slipped lower, and it gave investors a reason to believe that the Fed could get more dovish before their March meeting on the 20th.
The 10-year Treasury Yield fell sharply but the chart doesn't exactly exude bearishness (for yields) as it only fell to the bottom of a bull flag. Bull flags do not have to break to the upside, but they tend to, so let's see what happens in the coming days with this flag before assuming yields are heading lower on one good economic report.
And let's not forget that we still have an inverted 2-year / 10-year yield curve. Historically this has led to economic weakness. So far this one has not had that impact and it has been inverted for almost two years now, but the only thing that will "un-invert" it (called steepening) would be either a move higher in the 10-year yield (yuck!), a decline in the 2-year yield, or both. So this still hangs over the economy no matter how rosy things appear in the stock market.
Two major indications of US economic conditions are the Dow Transports and the price of oil. Both are looking good in recent months, but they both have a little work to do before breaking out of long ranges with resistance overhead.
It looks like 80+ on the price of oil would be the breakout number. Not that we want higher oil prices, but it would be a good sign for the economy.
The February seasonality chart was bearish but that is not what we experienced. Seasonality is not a primary indicator, but something to consider, so interpret this March seasonality chart however you see fit.
Data provided courtesy of www.sentimentrader.com
Once the TSP posts its prices for Thursday I will post the leaders of the February AutoTracker Contest on this page in the forum, although MRJ looks like the clear winner with a return over 8% for the month, regardless of Thursday's returns. There were other impressive returns out there as well.
Next week will be pretty quiet on the economic data front, although the week ends with the February jobs report, which will be the highlight.
The S&P 500 (C-fund) had a 3-day pullback and yesterday's action broke above the short-term descending resistance line, and that actually looks like a breakout above a small bull flag. The trend is up, there is some resistance near 5100, and that large gap remains open, so the new month has some decisions to make. That is, it can make new highs, or do some house cleaning and back and fill that gap while testing the bottom of the red rising channel?
DWCPF (S-fund) had a nice day but backed off its highs which kept it below the resistance line of that wedge-like pattern. That could be concerning as we saw a failed breakdown earlier in the month reverse the market higher. There's that open gap near 1965 as well, which is always a potential pullback target if it doesn't breakout beforehand - which is also possible with the new monthly money that could come into the market today or Monday.
The EFA (I-fund) was up but lagged some yesterday. As I mentioned above, it could be because the late rally in the US market didn't have a chance to help the overseas markets that close well before the US markets. The lows yesterday dipped into that open gap, but didn't finish the job. We have a bit of a flat top look, or maybe it's a bull flag, it's hard to say with that gap still open.
BND (bonds / F-fund) had a nice day but it closed off the highs after breaking above the 20 and 50-day EMAs earlier in the day, then closed below the 20-day EMA. This looks better than it did after Wednesday, but there's still some work to be done.
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.
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The tame inflationary data gave the stock market a reason to rally as yields slipped lower, and it gave investors a reason to believe that the Fed could get more dovish before their March meeting on the 20th.
The 10-year Treasury Yield fell sharply but the chart doesn't exactly exude bearishness (for yields) as it only fell to the bottom of a bull flag. Bull flags do not have to break to the upside, but they tend to, so let's see what happens in the coming days with this flag before assuming yields are heading lower on one good economic report.
And let's not forget that we still have an inverted 2-year / 10-year yield curve. Historically this has led to economic weakness. So far this one has not had that impact and it has been inverted for almost two years now, but the only thing that will "un-invert" it (called steepening) would be either a move higher in the 10-year yield (yuck!), a decline in the 2-year yield, or both. So this still hangs over the economy no matter how rosy things appear in the stock market.
Two major indications of US economic conditions are the Dow Transports and the price of oil. Both are looking good in recent months, but they both have a little work to do before breaking out of long ranges with resistance overhead.
It looks like 80+ on the price of oil would be the breakout number. Not that we want higher oil prices, but it would be a good sign for the economy.
The February seasonality chart was bearish but that is not what we experienced. Seasonality is not a primary indicator, but something to consider, so interpret this March seasonality chart however you see fit.
Data provided courtesy of www.sentimentrader.com
Once the TSP posts its prices for Thursday I will post the leaders of the February AutoTracker Contest on this page in the forum, although MRJ looks like the clear winner with a return over 8% for the month, regardless of Thursday's returns. There were other impressive returns out there as well.
Next week will be pretty quiet on the economic data front, although the week ends with the February jobs report, which will be the highlight.
The S&P 500 (C-fund) had a 3-day pullback and yesterday's action broke above the short-term descending resistance line, and that actually looks like a breakout above a small bull flag. The trend is up, there is some resistance near 5100, and that large gap remains open, so the new month has some decisions to make. That is, it can make new highs, or do some house cleaning and back and fill that gap while testing the bottom of the red rising channel?
DWCPF (S-fund) had a nice day but backed off its highs which kept it below the resistance line of that wedge-like pattern. That could be concerning as we saw a failed breakdown earlier in the month reverse the market higher. There's that open gap near 1965 as well, which is always a potential pullback target if it doesn't breakout beforehand - which is also possible with the new monthly money that could come into the market today or Monday.
The EFA (I-fund) was up but lagged some yesterday. As I mentioned above, it could be because the late rally in the US market didn't have a chance to help the overseas markets that close well before the US markets. The lows yesterday dipped into that open gap, but didn't finish the job. We have a bit of a flat top look, or maybe it's a bull flag, it's hard to say with that gap still open.
BND (bonds / F-fund) had a nice day but it closed off the highs after breaking above the 20 and 50-day EMAs earlier in the day, then closed below the 20-day EMA. This looks better than it did after Wednesday, but there's still some work to be done.
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.
