Stocks pulled back yesterday as Monday's winners were Turnaround Tuesday's losers, and Monday's laggards held up better on the day, although they were still flat to down. The Dow lost 18-points but big tech, which carried the S&P and Nasdaq higher on Monday, was dragged down by the sell off in Oracle yesterday, and that took the S&P and Nasdaq down with it. Apple declined again, and as goes Apple... Bonds were up slightly as yields slipped lower. The dollar moved higher adding some pressure to equities.
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Oil was up another $1.50 yesterday and is now near $90 a barrel and that's 40% above the May lows - that despite the recent strength in the dollar. That's quite a move and the stock market is getting fidgety. Get ready for higher gas prices if you haven't seen them already.
Yesterday's action in the S&P 500 can be looked at a couple of ways. The loss yesterday starts to make this decline off the September 1st high look like a potential bear flag, which often results in bearish action. But the lows yesterday actually filled in a "stealth gap" between Friday's closing price and Monday's lows, and maybe that's all yesterday decline was meant to do?
This of course comes in front of today's important CPI Report - Consumer Price Index for August, which could easily make either of those scenarios play out. It has been trending lower since the lofty and troublesome levels of 2022, but there was a slight tick up in the July report, and the rally in the price of oil may be putting more pressure on the inflation picture.
Expectations are looking for an increase of 0.6% in August, compared to the 0.2% rise in July. That's not the direction we want to see.
The Yield on the 10-Year Treasury was down yesterday, but this chart also has an interesting pivot point that could be settled by the CPI. The recent move up filled an over head gap and it has stalled there for the last 5 days creating what could be a flat top formation, which is generally bearish. But that flat may also be the top of a bullish flag, which could be a precursor to another test of the August highs.
The dollar was back on the positive side yesterday so it did not fill the open gap (red) that was right there for the taking yesterday. It stayed below the ascending support line (blue), but that line is rising rapidly.
The I-fund chart has been in trouble for a while and we have two interesting overseas charts that make up a big part of that fund - the Japanese Nikkei and the German DAX. Japan's Nikkei chart looks very good despite the sloping trend off the July 1 high as it looks like a giant bull flag.
On the other hand the DAX has been forming an ugly looking head an shoulders pattern and unfortunately it looks more like the chart of the I-fund, as you'll see down below. Europe is struggling a little more coming out its inflationary environment so there's a battle going on between those markets and the Asian markets.
Reminder this is a quadruple witching expiration week. It has a decent bullish bias historically but it can also be quite volatile. Next week - post quad expiration week in September, has a poor record historically.
The S&P 500 (C-fund) was down yesterday and gave back a big chunk of Monday's gains. That churning may have created a bear flag, but as I mentioned above, that pullback also filled in a gap that may have needed to get filled before trying to go forward. Which way these two technical setup plays out will obviously determined by this morning's CPI report, but because it is such a focus, I suspect the reaction will be overdone, whichever way it goes. The bulls have the historical advantage during this September quadruple witching expiration week, but that didn't work out so well last year, so tendencies are no guarantees.
DWCPF (S-fund) was up for much of the day yesterday as small caps out performed for the same reason it underperformed on Monday - it wasn't as impacted by the big tech stocks as the S&P 500 and Nasdaq. Regional banks rallied yesterday and that helped as well. However, the move back under the 50-day EMA, the small bear flag being formed, and the large head and shoulders pattern has the bears salivating because the chart looks vulnerable. A spike higher after the CPI would really help this set up.
EFA (I-fund) was down as the dollar rallied, and the small open gap below was likely pulling at it. There's a lot not to like on this chart but it has been able to hold above that key 200-day EMA for almost a month now since that test in August.
BND (Bonds / F-fund) was up slightly yesterday and this chart is looking vulnerable with that small head and shoulders pattern forming. As I mentioned a few times before, head and shoulders pattern are much more susceptible to a break down when they form within a declining market, unlike the S-fund's large head and shoulders which formed above the rally off the March lows.
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.
Like what you're seeing on TSP Talk? Why not Tell a Friend about us? We'd really appreciate it, and they may too.
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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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Oil was up another $1.50 yesterday and is now near $90 a barrel and that's 40% above the May lows - that despite the recent strength in the dollar. That's quite a move and the stock market is getting fidgety. Get ready for higher gas prices if you haven't seen them already.
Yesterday's action in the S&P 500 can be looked at a couple of ways. The loss yesterday starts to make this decline off the September 1st high look like a potential bear flag, which often results in bearish action. But the lows yesterday actually filled in a "stealth gap" between Friday's closing price and Monday's lows, and maybe that's all yesterday decline was meant to do?
This of course comes in front of today's important CPI Report - Consumer Price Index for August, which could easily make either of those scenarios play out. It has been trending lower since the lofty and troublesome levels of 2022, but there was a slight tick up in the July report, and the rally in the price of oil may be putting more pressure on the inflation picture.
Expectations are looking for an increase of 0.6% in August, compared to the 0.2% rise in July. That's not the direction we want to see.
The Yield on the 10-Year Treasury was down yesterday, but this chart also has an interesting pivot point that could be settled by the CPI. The recent move up filled an over head gap and it has stalled there for the last 5 days creating what could be a flat top formation, which is generally bearish. But that flat may also be the top of a bullish flag, which could be a precursor to another test of the August highs.
The dollar was back on the positive side yesterday so it did not fill the open gap (red) that was right there for the taking yesterday. It stayed below the ascending support line (blue), but that line is rising rapidly.
The I-fund chart has been in trouble for a while and we have two interesting overseas charts that make up a big part of that fund - the Japanese Nikkei and the German DAX. Japan's Nikkei chart looks very good despite the sloping trend off the July 1 high as it looks like a giant bull flag.
On the other hand the DAX has been forming an ugly looking head an shoulders pattern and unfortunately it looks more like the chart of the I-fund, as you'll see down below. Europe is struggling a little more coming out its inflationary environment so there's a battle going on between those markets and the Asian markets.
Reminder this is a quadruple witching expiration week. It has a decent bullish bias historically but it can also be quite volatile. Next week - post quad expiration week in September, has a poor record historically.
The S&P 500 (C-fund) was down yesterday and gave back a big chunk of Monday's gains. That churning may have created a bear flag, but as I mentioned above, that pullback also filled in a gap that may have needed to get filled before trying to go forward. Which way these two technical setup plays out will obviously determined by this morning's CPI report, but because it is such a focus, I suspect the reaction will be overdone, whichever way it goes. The bulls have the historical advantage during this September quadruple witching expiration week, but that didn't work out so well last year, so tendencies are no guarantees.
DWCPF (S-fund) was up for much of the day yesterday as small caps out performed for the same reason it underperformed on Monday - it wasn't as impacted by the big tech stocks as the S&P 500 and Nasdaq. Regional banks rallied yesterday and that helped as well. However, the move back under the 50-day EMA, the small bear flag being formed, and the large head and shoulders pattern has the bears salivating because the chart looks vulnerable. A spike higher after the CPI would really help this set up.
EFA (I-fund) was down as the dollar rallied, and the small open gap below was likely pulling at it. There's a lot not to like on this chart but it has been able to hold above that key 200-day EMA for almost a month now since that test in August.
BND (Bonds / F-fund) was up slightly yesterday and this chart is looking vulnerable with that small head and shoulders pattern forming. As I mentioned a few times before, head and shoulders pattern are much more susceptible to a break down when they form within a declining market, unlike the S-fund's large head and shoulders which formed above the rally off the March lows.
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.
Like what you're seeing on TSP Talk? Why not Tell a Friend about us? We'd really appreciate it, and they may too.
Thanks!
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.
