The bulls jumped on the opening bell with a flurry of buying on Monday morning, but about 90 minutes into the trading day the bears showed up and did what they've been doing for a few months -- they sold the rally. The bulls were nowhere to be found after that as they stepped aside and watched the bears push the indices toward their 2022 lows. The Dow managed to stay slightly positive after giving up a 400 point gain, but once again tech and the small caps took the brunt of the selling and each saw steep losses.
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The S&P 500 (C-fund) flirted with the March low but held so far, although a test of the February lows would not be out of the question. The action has been poor but it's been more of a slow torture than a panic sell off and maybe that's what we need to see before this turns around. There's so much bad news out there so I don't know who is still left holding stocks that they still need to sell, but that's what capitulation is -- an "I give up" selling frenzy that usually marks at least a short-term low.
The DWCPF (small caps / S-fund) is also flirting with its lows and obviously needs to hold or they will run the stops that are below the prior lows, and we could get a "whoosh" type of sell off. Like I said above, it's possible that would create a short-term capitulation low.
The EFA (I-fund) was getting some help from a weak dollar early yesterday but UUP rallied back near break even. By then, however, the overseas markets were close so the I-fund held onto some of those gains for a day.
BND (Bonds / F-fund) had another bad day as yields continue to spike on inflation fears. No safe haven buying here yet. It's probably getting close to a buying area, especially after the Fed meeting, but if you're looking for a rebound you may be better off looking for one in stocks first.
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.
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Wall Street was blaming a spike in Covid cases in China for yesterday's reversal. China has a zero tolerance policy with Covid meaning they shut down everything on any sign of a breakout, and that's why companies like Nike, Starbucks, and casino stocks were crushed yesterday as they all rely heavily on Chinese revenue and / or supply chains.
Here's a chart of one of the large cap ETFs in China. This goes back to the beginning of 2020 so it has now fallen below the Covid crash levels. They are concerned, or at least investors in China are. By comparison the S&P 500 is 90% above its Covid lows.
Yields spiked up and moved firmly above the 2% level, closing at 2.14%. This is interesting in that bond prices, which move counter to yields, have historically been a safe haven for investors during a bearish decline in stocks. Not this time.
Gold and silver were also beaten up yesterday, although they had been rallying for the last month, but they were no safe haven yesterday either.
There is a lot of crisscrossing sentiment out there, which of course makes a market, but certainly if there are extremes it's on the pessimistic side. That's usually a sign that a rebound is due, but as we saw for years during the bull market, stocks tend to overshoot before changing direction and the top callers were leaning the wrong way for a long time.
Now we see the bears doing their damage, and every time you think the bulls are about to retake control, things quickly rollover as the news hasn't been very good no matter which direction you look. Now the question becomes, how much more downside is left, and even if stocks eventually become fairly valued, how much can they overshoot on the downside before this market finds its footing?
The Nasdaq large tech companies have been punished this year and the Nasdaq 100 Index is now down 20% from its highs. I posted this chart in the TSP Talk Plus report yesterday but I wanted to show it here again for at least a whiff of hope.
This is the daily seasonality chart for the tech sector (XLK) broken down by the trading day of the year. It's hard to see but today is trading day #50 for 2022, which I marked below. Seasonality probably can't turn a market on a dime, but it's something to give the bulls a little bit of a breeze at their backs.
Chart provided courtesy of www.sentimentrader.com
The Fed's 2-day FOMC meeting starts today with the policy statement being announced on Wednesday at about 2 PM ET. Will the Fed throw the market a bone or throw it to the curb? There should be no surprises, but they do have their backs to the wall as they have to do what they have to do to address inflation.
Admin Note: March Madness is starting! Free Contest with Prizes for winners.
More info: https://www.tsptalk.com/mb/site-news-and-announcements/38581-march-madness-contest-2022-a.html
Here's a chart of one of the large cap ETFs in China. This goes back to the beginning of 2020 so it has now fallen below the Covid crash levels. They are concerned, or at least investors in China are. By comparison the S&P 500 is 90% above its Covid lows.
Yields spiked up and moved firmly above the 2% level, closing at 2.14%. This is interesting in that bond prices, which move counter to yields, have historically been a safe haven for investors during a bearish decline in stocks. Not this time.
Gold and silver were also beaten up yesterday, although they had been rallying for the last month, but they were no safe haven yesterday either.
There is a lot of crisscrossing sentiment out there, which of course makes a market, but certainly if there are extremes it's on the pessimistic side. That's usually a sign that a rebound is due, but as we saw for years during the bull market, stocks tend to overshoot before changing direction and the top callers were leaning the wrong way for a long time.
Now we see the bears doing their damage, and every time you think the bulls are about to retake control, things quickly rollover as the news hasn't been very good no matter which direction you look. Now the question becomes, how much more downside is left, and even if stocks eventually become fairly valued, how much can they overshoot on the downside before this market finds its footing?
The Nasdaq large tech companies have been punished this year and the Nasdaq 100 Index is now down 20% from its highs. I posted this chart in the TSP Talk Plus report yesterday but I wanted to show it here again for at least a whiff of hope.
This is the daily seasonality chart for the tech sector (XLK) broken down by the trading day of the year. It's hard to see but today is trading day #50 for 2022, which I marked below. Seasonality probably can't turn a market on a dime, but it's something to give the bulls a little bit of a breeze at their backs.
Chart provided courtesy of www.sentimentrader.com
The Fed's 2-day FOMC meeting starts today with the policy statement being announced on Wednesday at about 2 PM ET. Will the Fed throw the market a bone or throw it to the curb? There should be no surprises, but they do have their backs to the wall as they have to do what they have to do to address inflation.
Admin Note: March Madness is starting! Free Contest with Prizes for winners.
More info: https://www.tsptalk.com/mb/site-news-and-announcements/38581-march-madness-contest-2022-a.html
The S&P 500 (C-fund) flirted with the March low but held so far, although a test of the February lows would not be out of the question. The action has been poor but it's been more of a slow torture than a panic sell off and maybe that's what we need to see before this turns around. There's so much bad news out there so I don't know who is still left holding stocks that they still need to sell, but that's what capitulation is -- an "I give up" selling frenzy that usually marks at least a short-term low.
The DWCPF (small caps / S-fund) is also flirting with its lows and obviously needs to hold or they will run the stops that are below the prior lows, and we could get a "whoosh" type of sell off. Like I said above, it's possible that would create a short-term capitulation low.
The EFA (I-fund) was getting some help from a weak dollar early yesterday but UUP rallied back near break even. By then, however, the overseas markets were close so the I-fund held onto some of those gains for a day.
BND (Bonds / F-fund) had another bad day as yields continue to spike on inflation fears. No safe haven buying here yet. It's probably getting close to a buying area, especially after the Fed meeting, but if you're looking for a rebound you may be better off looking for one in stocks first.
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.
