Stocks opened lower again yesterday, but like Monday, we saw some buyers step in almost immediately. While the buying wasn't very enthusiastic, it did keep the bears from getting aggressive, although the small caps took a big hit. The small caps could be the leaders going forward but they tend to be a lot more volatile and you have to understand and accept that if you're watching the day to day action. Bond yields fell to new multi-month lows sending the F-fund higher.
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With Apple, MSFT, and Nvidia all up on the day, the Nasdaq did manage a modest gain despite declining issues and trading volume out pacing the advancing by a 2 to 1 margin, and it was even worse on the NYSE.
The October JOLTS report came out yesterday, which is a measure of job openings. The number came in at 8.773 million vs. September's 9.350 million, so we are seeing some tightening in the jobs market. That's what the Fed has been wanting to see so it's good news for lower interest rates argument, but also another indication of an economic slowdown.
On the other hand the ISM Non-Manufacturing PMI report came out a little better than expected, but when all was said and done yesterday, the bond market saw yields falling again, giving the edge to weakness developing in the economy, and that's been true since the 10-year Treasury Yield peaked near 5%.
The dollar's recent relief rally is hitting some resistance, but as I talked about yesterday, the Fed's balance sheet being reduced could keep the dollar a little more buoyant than yields.
Oil hit a 5 month low yesterday after failing at the moving averages at the end of November. The price of oil is tracking the recent movement in Treasury Yields, which is often the case since it is a good indication of demand and that translates into the mood of the consumer.
That said, Black Friday sales were pretty good so the consumer hasn't gone away yet. I understand consumer debt is getting high again so did they have cash for these transactions, or is debt just accumulating, especially given the rising prices over the last few years?
Another indicator of economic conditions is the action in the Dow Transportation Index. It pulled back sharply yesterday (1.5%) but it can be forgiven after Friday's near 3% gain.
There are a lot of indications of weakening economy, but the Transports seems to be bucking that trend, along with the stock market in general, which has been hot, but perhaps in need of a rest. This longer term chart of the S&P 500 shows that, while trends can move in one direction for a long time, that 50-day EMA can be a magnet in the short term while the market works off overbought and oversold conditions. Right now the S&P 500 is 137-points above its 50-day EMA, although that moving average is rising quickly.
We will get the November Jobs Report on Friday and estimates are looking for a gain of about 175,000 jobs with an unemployment rate of 3.9%.
The S&P 500 (C-fund) was down slightly on the day, battling back from another weak open, but the bulls are hanging in there. It closed right on the level that was the top of the July open gap and everything we see here indicates that a pullback is very possible. That's usually when the market fools us. It wouldn't surprise me if stocks kept going higher because of the trickery of savvy market makers, but it would be very difficult to buy anything at these nosebleed levels.
DWCPF (S-fund) is digesting the huge two-day rally, and it had actually been up for 4 straights days before yesterday's decline. That's not a long streak but throw in a 2.5% gain on Friday, and that's quite a 4-day gain, so like the Transports, it can be forgiven. Now that the index is back below the September 1st peak, it may be telling us that it is about to start a double top pullback. A pullback to 1760 would tidy this chart up nicely, but of course we have those other giant open gaps way below that.
EFA (I-fund) pulled back yesterday and the low of the day tested a couple of support lines. That makes today fairly important because one of those support lines is the bottom of the ascending channel, which could break if the EFA is not up today.
BND (bonds / F-fund) rallied back quickly after Monday's big decline. It is now at a double resistance area near the July peak. Something is going to have to give or hold here. I don't think I'd be too aggressive in the F-fund until this pulls back some.
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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With Apple, MSFT, and Nvidia all up on the day, the Nasdaq did manage a modest gain despite declining issues and trading volume out pacing the advancing by a 2 to 1 margin, and it was even worse on the NYSE.
The October JOLTS report came out yesterday, which is a measure of job openings. The number came in at 8.773 million vs. September's 9.350 million, so we are seeing some tightening in the jobs market. That's what the Fed has been wanting to see so it's good news for lower interest rates argument, but also another indication of an economic slowdown.
On the other hand the ISM Non-Manufacturing PMI report came out a little better than expected, but when all was said and done yesterday, the bond market saw yields falling again, giving the edge to weakness developing in the economy, and that's been true since the 10-year Treasury Yield peaked near 5%.
The dollar's recent relief rally is hitting some resistance, but as I talked about yesterday, the Fed's balance sheet being reduced could keep the dollar a little more buoyant than yields.
Oil hit a 5 month low yesterday after failing at the moving averages at the end of November. The price of oil is tracking the recent movement in Treasury Yields, which is often the case since it is a good indication of demand and that translates into the mood of the consumer.
That said, Black Friday sales were pretty good so the consumer hasn't gone away yet. I understand consumer debt is getting high again so did they have cash for these transactions, or is debt just accumulating, especially given the rising prices over the last few years?
Another indicator of economic conditions is the action in the Dow Transportation Index. It pulled back sharply yesterday (1.5%) but it can be forgiven after Friday's near 3% gain.
There are a lot of indications of weakening economy, but the Transports seems to be bucking that trend, along with the stock market in general, which has been hot, but perhaps in need of a rest. This longer term chart of the S&P 500 shows that, while trends can move in one direction for a long time, that 50-day EMA can be a magnet in the short term while the market works off overbought and oversold conditions. Right now the S&P 500 is 137-points above its 50-day EMA, although that moving average is rising quickly.
We will get the November Jobs Report on Friday and estimates are looking for a gain of about 175,000 jobs with an unemployment rate of 3.9%.
The S&P 500 (C-fund) was down slightly on the day, battling back from another weak open, but the bulls are hanging in there. It closed right on the level that was the top of the July open gap and everything we see here indicates that a pullback is very possible. That's usually when the market fools us. It wouldn't surprise me if stocks kept going higher because of the trickery of savvy market makers, but it would be very difficult to buy anything at these nosebleed levels.
DWCPF (S-fund) is digesting the huge two-day rally, and it had actually been up for 4 straights days before yesterday's decline. That's not a long streak but throw in a 2.5% gain on Friday, and that's quite a 4-day gain, so like the Transports, it can be forgiven. Now that the index is back below the September 1st peak, it may be telling us that it is about to start a double top pullback. A pullback to 1760 would tidy this chart up nicely, but of course we have those other giant open gaps way below that.
EFA (I-fund) pulled back yesterday and the low of the day tested a couple of support lines. That makes today fairly important because one of those support lines is the bottom of the ascending channel, which could break if the EFA is not up today.
BND (bonds / F-fund) rallied back quickly after Monday's big decline. It is now at a double resistance area near the July peak. Something is going to have to give or hold here. I don't think I'd be too aggressive in the F-fund until this pulls back some.
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.
