Stocks were mixed on Friday and, after a week of crucial inflation data, the indices and the TSP stock and bond funds were all up for the week. The S&P 500 and Nasdaq were flat on Friday while the Dow and small caps lagged, and the I-fund led with a half percent gain. Bonds did well as yields fell further on the slightly cooler PPI report (Producer Prices.)
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The advance / decline numbers were on the negative side on Friday, but the bulls did a good jobs of keeping the bears at bay last week despite some hotter than expected CPI inflation data. With the CPI out of the way, investors' attention will turn toward earnings although the market movers won't start reporting until next week. So what will be the next catalyst?
There are some geopolitical events influencing markets but one thing I did notice over the weekend was that the Fed's balance sheet moved up last week. That's been a rare event over the last year, since the spike during the regional banking issue in early 2023.
It happened in December and also in June of last year. It may be a coincidence - although not necessarily, that stocks were up during the week they increased the balance sheet, as well as the following week.
It's not much but rather than reducing the balance sheet or keeping it flat as has been the trend, they increased it in early June, again during the week of December 6th, and now this past week.
Here's what happened to the S&P 500 during those prior monetary easing weeks, and what happened last week, and if the trend continues, it may be telling us that there is a wind at the stock market's back this week. There's nothing like a little cheap money and liquidity to give the market a boost so we'll see as the charts battle a double top.
The S&P 500 has now gotten back the losses from the first week in January but it is once again facing some resistance at a major double. We've been watching the similarities on the S&P 500 between the current chart and chart from 1999 - 2000, and this is about where the S&P 500 peaked in early 2000.
It's been dancing up by the highs created in January 2022 for the last three weeks, but Friday's close of 4784 was actually the highest weekly close ever for the S&P 500. It just hasn't made it above the those prior highs a couple of years ago
Whether the S&P can break out to new highs might depend greatly on yields and the dollar. A weaker dollar and falling yields brought the bulls back to life when both peaked in late October. They both rallied to start the year but since they've been struggling below key moving average resistance. Ironically, the threat of a recession could pull these down and keep stocks buoyant, for now. Eventually a recession would hurt the stock market but right now it's not showing too much concern with it closing at that all time weekly closing high.
The end of January could be a lot more volatile than it is right now because, not only will the Magnificent Seven stocks be reporting earnings then, but there is another Fed FOMC meeting on the 30th and 31st of the month.
The S&P 500 (C-fund) is pushing against the December highs and a double top pullback is possible here, but even more compelling is the highs from late 2021 / early 2022 that could keep the pressure on this recent rally, similar to the early 2000 peak we talked about above, that turned out to be a market high before that bear market started. It's a different situation compared to the dot com bubble starting to burst back then, but then again there's a lot of talk about a debt bubble getting ready to burst.
DWCPF (S-fund) has been struggling lately and it has created a bearish looking flag in the process. It continues to hold above the 20-day EMA, but it can't seen to bounce off of it. It's not the worst looking chart but there are certainly some cracks forming.
EFA (I-fund) is also dancing above its 20-day EMA and it has been flirting with the recent highs despite the dollar refusing to rollover. This had a bear flag forming but now that it is nearly touching those recent highs, it looks more like a cup formation, which tends to be more bullish.
BND (bonds / F-fund) looks very similar to the C and I-fund charts and the question is whether it can breakout to new highs or if the double top is going to hold. The deciding factor may be whether the bond market is more concerned about inflation or a possible recession. The latter would help the bond market and the F-fund.
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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The advance / decline numbers were on the negative side on Friday, but the bulls did a good jobs of keeping the bears at bay last week despite some hotter than expected CPI inflation data. With the CPI out of the way, investors' attention will turn toward earnings although the market movers won't start reporting until next week. So what will be the next catalyst?
There are some geopolitical events influencing markets but one thing I did notice over the weekend was that the Fed's balance sheet moved up last week. That's been a rare event over the last year, since the spike during the regional banking issue in early 2023.
It happened in December and also in June of last year. It may be a coincidence - although not necessarily, that stocks were up during the week they increased the balance sheet, as well as the following week.
It's not much but rather than reducing the balance sheet or keeping it flat as has been the trend, they increased it in early June, again during the week of December 6th, and now this past week.
Here's what happened to the S&P 500 during those prior monetary easing weeks, and what happened last week, and if the trend continues, it may be telling us that there is a wind at the stock market's back this week. There's nothing like a little cheap money and liquidity to give the market a boost so we'll see as the charts battle a double top.
The S&P 500 has now gotten back the losses from the first week in January but it is once again facing some resistance at a major double. We've been watching the similarities on the S&P 500 between the current chart and chart from 1999 - 2000, and this is about where the S&P 500 peaked in early 2000.
It's been dancing up by the highs created in January 2022 for the last three weeks, but Friday's close of 4784 was actually the highest weekly close ever for the S&P 500. It just hasn't made it above the those prior highs a couple of years ago
Whether the S&P can break out to new highs might depend greatly on yields and the dollar. A weaker dollar and falling yields brought the bulls back to life when both peaked in late October. They both rallied to start the year but since they've been struggling below key moving average resistance. Ironically, the threat of a recession could pull these down and keep stocks buoyant, for now. Eventually a recession would hurt the stock market but right now it's not showing too much concern with it closing at that all time weekly closing high.
The end of January could be a lot more volatile than it is right now because, not only will the Magnificent Seven stocks be reporting earnings then, but there is another Fed FOMC meeting on the 30th and 31st of the month.
The S&P 500 (C-fund) is pushing against the December highs and a double top pullback is possible here, but even more compelling is the highs from late 2021 / early 2022 that could keep the pressure on this recent rally, similar to the early 2000 peak we talked about above, that turned out to be a market high before that bear market started. It's a different situation compared to the dot com bubble starting to burst back then, but then again there's a lot of talk about a debt bubble getting ready to burst.
DWCPF (S-fund) has been struggling lately and it has created a bearish looking flag in the process. It continues to hold above the 20-day EMA, but it can't seen to bounce off of it. It's not the worst looking chart but there are certainly some cracks forming.
EFA (I-fund) is also dancing above its 20-day EMA and it has been flirting with the recent highs despite the dollar refusing to rollover. This had a bear flag forming but now that it is nearly touching those recent highs, it looks more like a cup formation, which tends to be more bullish.
BND (bonds / F-fund) looks very similar to the C and I-fund charts and the question is whether it can breakout to new highs or if the double top is going to hold. The deciding factor may be whether the bond market is more concerned about inflation or a possible recession. The latter would help the bond market and the F-fund.
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.
