Stocks were flat to mostly higher yesterday with mixed breadth. The Dow was flat, while the Russell 2000 and Dow Transportation Index were down, but the S&P 500 and Nasdaq both posted healthy gains. The indices are almost all over stretched to the upside after the 7-week relentless rally, but we are also entering the strongest seasonal period for stocks. Bond yields and the dollar were up, pushing the F-fund down.
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Yesterday, the breadth indicators, represented by advance/decline numbers, showed a mixed day. Despite the Nasdaq experiencing significant gains, there were more stocks declining than advancing. This was attributed to the underperformance of broader indices, which primarily consist of smaller stocks.
Yields were up with the 10-year yield bouncing off of the recent lows, but nothing significant. The dollar was also up filling in a small overhead gap so we'll see if that acts as resistance today.
I'll take a more macro view of the market right now since we know the short term is just exploding higher since the October low. But the weekly chart of the S&P 500 shows that we may be stepping out of bounds on the trading channel, which happens, but often corrects itself, and the only question I have - and I could be wrong - is whether the snap back into the trading channel happens after the New Year starts or during the normally bullish period between Christmas and the New Year, when everyone least expects it?
That 4800 area is the all-time high on the S&P 500 and I'm sure the folks on Wall Street would love that to get tagged before the end of the year. By then most Joe and Jane Six Pack investors will have followed the herd into the market - perhaps just in time for the more savvy Wall Street money manager to start selling and taking profits while Joe and Jane are filled with complacency. Remember how bullish everyone was at the end of July - the last time the S&P left the channel?
This chart is for gee-whiz purposes since China is not a part of our I-fund, but it is obviously a major player in the global markets, and here the Shanghai Index is closing at a new 52-week low, and on the brink of a possible major breakdown while the rest of the world markets are rallying.
It's close to testing the 2022 bear market lows. I'm not sure what this will mean to US stocks, but it has to mean something. If China's economy is in trouble, it will have a global impact eventually.
We will get the PCE Prices report on Friday, as well as the Personal Spending and Income reports. That will be the last trading day before Christmas and could be a very light trading volume day. This is the key inflation indicator for the Fed and it's not likely to cause any trouble, but if it does happen to be hotter than expected, on a light trading day, it could be a market mover.
The S&P 500 (C-fund) is reaching toward that all time high of 4819 back at the end of 2021. It's plowed through some heavy resistance to this point and there's not much in the way now before hitting that high. It's clearly stretched and due for some backing and filling, but sometimes it has a determined destination, and it may not take no for an answer. I have to wonder if the Santa Claus rally will have its historical luster when we didn't get a typical early December pullback. If it runs right up into the end of the year, I am concerned about what could happen in January when the euphoric bulls may finally exhale.
DWCPF (S-fund) has every reason to take a break here after what could be an exhaustion gap up last week. One thing to look out for is a gap down below last week's open gap. That would create an island reversal pattern that would be quite bearish, but can something like that happen this time of year?
EFA (I-fund) had a false breakout last week and yesterday's moderate gains couldn't push it back above the old resistance. It's tough to look at this and think, as an investor, that I have to buy it here, but it has worked so far, so good luck to those trying.
BND (Bonds / F-fund) is basically doing what the stock market is doing. It paused and dipped for a second straight day as it eyes the open gap near 73. I didn't even mention the other four open gaps below that. Oops!
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
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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Yesterday, the breadth indicators, represented by advance/decline numbers, showed a mixed day. Despite the Nasdaq experiencing significant gains, there were more stocks declining than advancing. This was attributed to the underperformance of broader indices, which primarily consist of smaller stocks.
Yields were up with the 10-year yield bouncing off of the recent lows, but nothing significant. The dollar was also up filling in a small overhead gap so we'll see if that acts as resistance today.
I'll take a more macro view of the market right now since we know the short term is just exploding higher since the October low. But the weekly chart of the S&P 500 shows that we may be stepping out of bounds on the trading channel, which happens, but often corrects itself, and the only question I have - and I could be wrong - is whether the snap back into the trading channel happens after the New Year starts or during the normally bullish period between Christmas and the New Year, when everyone least expects it?
That 4800 area is the all-time high on the S&P 500 and I'm sure the folks on Wall Street would love that to get tagged before the end of the year. By then most Joe and Jane Six Pack investors will have followed the herd into the market - perhaps just in time for the more savvy Wall Street money manager to start selling and taking profits while Joe and Jane are filled with complacency. Remember how bullish everyone was at the end of July - the last time the S&P left the channel?
This chart is for gee-whiz purposes since China is not a part of our I-fund, but it is obviously a major player in the global markets, and here the Shanghai Index is closing at a new 52-week low, and on the brink of a possible major breakdown while the rest of the world markets are rallying.
It's close to testing the 2022 bear market lows. I'm not sure what this will mean to US stocks, but it has to mean something. If China's economy is in trouble, it will have a global impact eventually.
We will get the PCE Prices report on Friday, as well as the Personal Spending and Income reports. That will be the last trading day before Christmas and could be a very light trading volume day. This is the key inflation indicator for the Fed and it's not likely to cause any trouble, but if it does happen to be hotter than expected, on a light trading day, it could be a market mover.
The S&P 500 (C-fund) is reaching toward that all time high of 4819 back at the end of 2021. It's plowed through some heavy resistance to this point and there's not much in the way now before hitting that high. It's clearly stretched and due for some backing and filling, but sometimes it has a determined destination, and it may not take no for an answer. I have to wonder if the Santa Claus rally will have its historical luster when we didn't get a typical early December pullback. If it runs right up into the end of the year, I am concerned about what could happen in January when the euphoric bulls may finally exhale.
DWCPF (S-fund) has every reason to take a break here after what could be an exhaustion gap up last week. One thing to look out for is a gap down below last week's open gap. That would create an island reversal pattern that would be quite bearish, but can something like that happen this time of year?
EFA (I-fund) had a false breakout last week and yesterday's moderate gains couldn't push it back above the old resistance. It's tough to look at this and think, as an investor, that I have to buy it here, but it has worked so far, so good luck to those trying.
BND (Bonds / F-fund) is basically doing what the stock market is doing. It paused and dipped for a second straight day as it eyes the open gap near 73. I didn't even mention the other four open gaps below that. Oops!
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
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.
