Whether it was a culmination of less favorable inflationary data, earnings and nervous guidance from JPMorgan Chase's Jamie Dimon, or just the dip buyers giving up for a day and allowing a pullback to ensue, stocks relented to the bears on Friday and we had the worse day for the S&P 500 since January. The losses were broad and sharp despite some relief in the bond yields.
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The selling was severely one sided as the declining volume on the NYSE was more than 10 to 1 over the advancing volume. Despite the Nasdaq nearly making new highs last week, there were 211 new 52-lows made on Friday.
The 10-year Treasury Yield fell from 5% to 3.8% from October to December last year, which helped ignite the recent bull market rally. Now the 10-year has climbed back over 4.5% and as the sentiment towards interest rate cuts changes, the stock market is accepting, and adjusting to, this new investing environment.
The dollar is also much stronger as the economy remains more resilient than most expected, and a rising higher dollar will put pressure on prices, although commodity prices have been rising in the inflationary setting.
The chances of an interest rate cut in June has fallen from 55% to 27% in the last month, and even in the last week it fell from 51% to 27%, so again, the stock market is adjusting.
The price of oil isn't helping the inflation situation as it remains above $85 a barrel and trending higher, although in the short-term it may be at the top of its trading channel and could dip back to $83. Not that it would change this a whole lot but a decline in oil for a few days could give the stock market a little reprieve. However, the tensions in the Middle East are boiling over and that's part of the catalyst for this move.
The Dow Transportation Index has fallen all the way back to the bottom of its huge bull flag, so it looks like it's do or die time. It could spring up off that support line, or it could have those open gaps down closer to 14,000 on its radar. However this gets resolved could tell us if the bull market in stocks is done or just taking a few days off.
This week has a bullish bias being an options expiration week, but with momentum perhaps shifting to the bears' side, that advantage may be put to the test. Earnings season is here and the market will get some feedback on how interest rate changes may be impacting the bottom line of these companies.
The S&P 500 (C-fund) has been sliding lower, but until Friday it had been very choppy and more of a sideways consolidation. Friday's decline broke below another key moving average and it may have to deal with that highly followed 50-day average in purple just below, where we could see a lot of buy orders, but sell stop orders just below the average. The PMO indicator still looks troublesome.
DWCPF (S-fund) has been in a downtrend since peaking in late March. It broke below its 50-day average and there is an open gap within reach. I also talked about a possible head and shoulders being formed and the short-term action may depend on whether the right shoulder has already been completed and is read for a breakdown, or if it still needs to be completed and we get a modest rally to the top of the shoulder.
The EFA (I-fund) fell to the 2024 rising support line after falling below its 50-day EMA. Like the Transportation Index chart, this looks like it's close to do or die, although falling through support and filling the gap near 76.50 before recovering is also a possibility.
BND (Bonds / F-fund) took one on the chin last week but it does have a large open gap above it that could help it with a relief rally this week if yields cooperate and pullback a little more like they did on Friday.
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 selling was severely one sided as the declining volume on the NYSE was more than 10 to 1 over the advancing volume. Despite the Nasdaq nearly making new highs last week, there were 211 new 52-lows made on Friday.
The 10-year Treasury Yield fell from 5% to 3.8% from October to December last year, which helped ignite the recent bull market rally. Now the 10-year has climbed back over 4.5% and as the sentiment towards interest rate cuts changes, the stock market is accepting, and adjusting to, this new investing environment.
The dollar is also much stronger as the economy remains more resilient than most expected, and a rising higher dollar will put pressure on prices, although commodity prices have been rising in the inflationary setting.
The chances of an interest rate cut in June has fallen from 55% to 27% in the last month, and even in the last week it fell from 51% to 27%, so again, the stock market is adjusting.
The price of oil isn't helping the inflation situation as it remains above $85 a barrel and trending higher, although in the short-term it may be at the top of its trading channel and could dip back to $83. Not that it would change this a whole lot but a decline in oil for a few days could give the stock market a little reprieve. However, the tensions in the Middle East are boiling over and that's part of the catalyst for this move.
The Dow Transportation Index has fallen all the way back to the bottom of its huge bull flag, so it looks like it's do or die time. It could spring up off that support line, or it could have those open gaps down closer to 14,000 on its radar. However this gets resolved could tell us if the bull market in stocks is done or just taking a few days off.
This week has a bullish bias being an options expiration week, but with momentum perhaps shifting to the bears' side, that advantage may be put to the test. Earnings season is here and the market will get some feedback on how interest rate changes may be impacting the bottom line of these companies.
The S&P 500 (C-fund) has been sliding lower, but until Friday it had been very choppy and more of a sideways consolidation. Friday's decline broke below another key moving average and it may have to deal with that highly followed 50-day average in purple just below, where we could see a lot of buy orders, but sell stop orders just below the average. The PMO indicator still looks troublesome.
DWCPF (S-fund) has been in a downtrend since peaking in late March. It broke below its 50-day average and there is an open gap within reach. I also talked about a possible head and shoulders being formed and the short-term action may depend on whether the right shoulder has already been completed and is read for a breakdown, or if it still needs to be completed and we get a modest rally to the top of the shoulder.
The EFA (I-fund) fell to the 2024 rising support line after falling below its 50-day EMA. Like the Transportation Index chart, this looks like it's close to do or die, although falling through support and filling the gap near 76.50 before recovering is also a possibility.
BND (Bonds / F-fund) took one on the chin last week but it does have a large open gap above it that could help it with a relief rally this week if yields cooperate and pullback a little more like they did on Friday.
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.
