Stocks spent the day chopping around on Wednesday but for a third straight day a lot of the gains came later in the day after a weak morning. There was a late shake up after the Fed meeting minutes were released, which added some volatility to the day, the big three indices all closed with gains. Meanwhile small caps, the Transports, and NYSE breadth were all negative on the day. The dollar was up again and bond yields rebounded.
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At about 2PM ET we saw a lot of volatility after the Fed reiterated in their released meeting minutes, that their main focus is still reducing inflation, even if it comes at the expense of the economy. On that note we saw yields move up as the 10-year Treasury moved back over 2.9%, but that 50-day EMA may get in the way of trying to fill that open gap above 3%. The 2-year T-note closed at 2.97% so there is still an inversion.
We saw some nice gains in many of the indices but internally isn't wasn't all that healthy as it looked as decliners easily outpaced advancers on both the NYSE and Nasdaq. Volume breadth was mixed with the NYSE deep in the red while the highly traded big tech gains pushed the Nasdaq volume breadth into positive territory.
The price of oil fell again but it got a noticeable bounce off the 200-day EMA when it was trading as low as $95 a barrel. Is that it? Did we just get a 3-week bear market in oil and now it's ready to bottom and resume the upside? Maybe. The threat of diminished demand because of the recession data is battling the supply issues that we are having because of political policies and the war in Ukraine. But a 20% decline is quite a move so that 200-day EMA could be an important pivot point.
The market has reasons to rebound as we saw 20% to 30% losses in some of the major indices at their lows, and that's significant and possibly "enough." But there are still a lot of headwinds out there especially if oil does head back up, the Fed keeps raising interest rates, and the economy continues to slow. The question is how much has been priced in already?
Earnings will start to come out this month and I don't know how we expect business as usual numbers and guidance with everything that has been going on, and from what I understand, estimates have not been lowered that much so we could see some misses.
The Jobs report will come out on Friday and the estimates are looking for a gain of about 250,000 jobs and an unemployment rate of 3.6%.
The S&P 500 (C-fund) hit the 20-day moving average yesterday and did manage to close a couple of points above it, but there is more resistance in the 3850 area. At some point "they" may try to fill that open gap near 4000 and it could be another attempt to get mom and pop to buy back in. I'm not completely against the possibility that the market is trying to make a low here, but I am not 100% convinced that the fundamental picture is fully priced in yet, and it's because of the Fed's hawkish stance, and the real chance that earnings will disappoint in the weeks ahead.
The DWCPF (S-fund) had a bad day despite the gains in the big three indices. The 20-day average did hold as resistance at the close so today's direction will be key as it could fail or breakout now that it is in the area. An argument can also be made whether that is a head and shoulders pattern (blue), which is very bearish while forming in a downtrend.
EFA (I-fund) has been lagging badly because of the recent pop in the value of the dollar. The bad news is this chart is in a very weak looking downtrend. The good news may be that it is near the lower end of a descending trading channel, and if the dollar can ever take a breather and pullback, this could get a nice bounce.
BND (Bonds / F-fund) was down sharply after the Fed reiterated their hawkish stance on rates. Technically it fell back below the 50-day EMA, but as we mentioned yesterday, there are some open gaps below that could draw attention before we find out if this does want to officially break its downtrend, and one was filled yesterday (blue box.)
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
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Thanks 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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At about 2PM ET we saw a lot of volatility after the Fed reiterated in their released meeting minutes, that their main focus is still reducing inflation, even if it comes at the expense of the economy. On that note we saw yields move up as the 10-year Treasury moved back over 2.9%, but that 50-day EMA may get in the way of trying to fill that open gap above 3%. The 2-year T-note closed at 2.97% so there is still an inversion.
We saw some nice gains in many of the indices but internally isn't wasn't all that healthy as it looked as decliners easily outpaced advancers on both the NYSE and Nasdaq. Volume breadth was mixed with the NYSE deep in the red while the highly traded big tech gains pushed the Nasdaq volume breadth into positive territory.
The price of oil fell again but it got a noticeable bounce off the 200-day EMA when it was trading as low as $95 a barrel. Is that it? Did we just get a 3-week bear market in oil and now it's ready to bottom and resume the upside? Maybe. The threat of diminished demand because of the recession data is battling the supply issues that we are having because of political policies and the war in Ukraine. But a 20% decline is quite a move so that 200-day EMA could be an important pivot point.
The market has reasons to rebound as we saw 20% to 30% losses in some of the major indices at their lows, and that's significant and possibly "enough." But there are still a lot of headwinds out there especially if oil does head back up, the Fed keeps raising interest rates, and the economy continues to slow. The question is how much has been priced in already?
Earnings will start to come out this month and I don't know how we expect business as usual numbers and guidance with everything that has been going on, and from what I understand, estimates have not been lowered that much so we could see some misses.
The Jobs report will come out on Friday and the estimates are looking for a gain of about 250,000 jobs and an unemployment rate of 3.6%.
The S&P 500 (C-fund) hit the 20-day moving average yesterday and did manage to close a couple of points above it, but there is more resistance in the 3850 area. At some point "they" may try to fill that open gap near 4000 and it could be another attempt to get mom and pop to buy back in. I'm not completely against the possibility that the market is trying to make a low here, but I am not 100% convinced that the fundamental picture is fully priced in yet, and it's because of the Fed's hawkish stance, and the real chance that earnings will disappoint in the weeks ahead.
The DWCPF (S-fund) had a bad day despite the gains in the big three indices. The 20-day average did hold as resistance at the close so today's direction will be key as it could fail or breakout now that it is in the area. An argument can also be made whether that is a head and shoulders pattern (blue), which is very bearish while forming in a downtrend.
EFA (I-fund) has been lagging badly because of the recent pop in the value of the dollar. The bad news is this chart is in a very weak looking downtrend. The good news may be that it is near the lower end of a descending trading channel, and if the dollar can ever take a breather and pullback, this could get a nice bounce.
BND (Bonds / F-fund) was down sharply after the Fed reiterated their hawkish stance on rates. Technically it fell back below the 50-day EMA, but as we mentioned yesterday, there are some open gaps below that could draw attention before we find out if this does want to officially break its downtrend, and one was filled yesterday (blue box.)
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 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.
