Stocks flip flopped between gains and losses a few times yesterday, initially rallying on a slightly cool CPI report suggesting that inflation is still under control. Later the Fed meeting minutes were released exposing some economic concerns. By the time the closing bell rang the bears had a rare win as the indices were all down on the day. Is it too early to say if yesterday was a shift in character for the market, or is it just another dip to buy?
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The Fed meeting minutes said the Federal Reserve staff believes the banking crisis will likely lead to a recession. So it didn't take long for a tamer than anticipated CPI report, to be pushed aside in favor of recession fears.
The dollar was down again and weakness in the dollar will keep pricing pressure high as we see gold, silver, oil, and other commodity prices rising recently.
Oil broke out rather than filling that gap so, as we talked about the other day, $90 - $100 looks like a very real possibility by the summer, and you know what that will do to gas prices during the busy driving season.
Gold is making new highs as investors have been seeing the writing on the wall that inflation and the Fed's rapid rate hikes to counter it would potentially bring on a recession and a weaker dollar.
The I-fund (EFA) continues to outperform, and it broke out to a new high yesterday, because of the decline in the dollar but again, a plethora of gaps have been opened along the way.
The higher oil prices may be having it's impact on the airline industry, which would also suffer if there is a recession. This chart looks ready to break down.
The airlines are a major part of the Dow Transportation Index and I have been highlighting this bear flag for a while.
How about the banks, especially small regional banks (KRE)? This is an ugly chart that is in a due or die position looking over a precipice. The second chart gives us a little hope that the current area has some support as it just filled an open gap from way back in 2020.
Since these small banks are all over the Russell 2000 and the S-fund, we see more bear flags there as well. If the KRE goes down, the Russell and the S-fund will likely go with it. However, if the gap on the KRE holds, perhaps there's a reason to believe that the small caps are bottoming.
The action has been bullish in recent weeks, but mostly inexplicable considering the information we have. Perhaps the 2022 bear market priced all of this bad news in, but that decline was mostly about inflation. Earnings may start to show evidence of the current economic situation, although maybe we'll be surprised. We'll know soon enough as we see some major bank earnings released on Friday and again into next week.
We will get the PPI - Producer Price Index report this morning before the opening bell.
The S&P 500 (C-fund) has been trading between 4075 and 4130 for the last week or so, and it closed back below 4100 yesterday. 4070 is a key support area right now, and if that gets taken out we'd have to consider a pullback to test of the moving averages just above 4000, or even fill that open gap near 3975. No harm done yet, but yesterday's action felt a little different and the last two days we saw the indices close near the lows of the day. Something we haven't seen much of in a while.
The DWCPF (S-fund) took one on the chin yesterday after a morning rally failed. The bear flag is still in the picture and yesterday the 50-day EMA and descending trendline acted as resistance. The 1630 area at the bottom of the bear flag looks critical today.
BND (Bonds / F-fund) has been backing and filling after the big rally off the early March low. I'm seeing an inverted head and shoulders pattern and this may indicate higher prices for bonds and the F-fund as yields fall in anticipation of a possible recession.
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 so much 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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The Fed meeting minutes said the Federal Reserve staff believes the banking crisis will likely lead to a recession. So it didn't take long for a tamer than anticipated CPI report, to be pushed aside in favor of recession fears.
The dollar was down again and weakness in the dollar will keep pricing pressure high as we see gold, silver, oil, and other commodity prices rising recently.
Oil broke out rather than filling that gap so, as we talked about the other day, $90 - $100 looks like a very real possibility by the summer, and you know what that will do to gas prices during the busy driving season.
Gold is making new highs as investors have been seeing the writing on the wall that inflation and the Fed's rapid rate hikes to counter it would potentially bring on a recession and a weaker dollar.
The I-fund (EFA) continues to outperform, and it broke out to a new high yesterday, because of the decline in the dollar but again, a plethora of gaps have been opened along the way.
The higher oil prices may be having it's impact on the airline industry, which would also suffer if there is a recession. This chart looks ready to break down.
The airlines are a major part of the Dow Transportation Index and I have been highlighting this bear flag for a while.
How about the banks, especially small regional banks (KRE)? This is an ugly chart that is in a due or die position looking over a precipice. The second chart gives us a little hope that the current area has some support as it just filled an open gap from way back in 2020.
Since these small banks are all over the Russell 2000 and the S-fund, we see more bear flags there as well. If the KRE goes down, the Russell and the S-fund will likely go with it. However, if the gap on the KRE holds, perhaps there's a reason to believe that the small caps are bottoming.
The action has been bullish in recent weeks, but mostly inexplicable considering the information we have. Perhaps the 2022 bear market priced all of this bad news in, but that decline was mostly about inflation. Earnings may start to show evidence of the current economic situation, although maybe we'll be surprised. We'll know soon enough as we see some major bank earnings released on Friday and again into next week.
We will get the PPI - Producer Price Index report this morning before the opening bell.
The S&P 500 (C-fund) has been trading between 4075 and 4130 for the last week or so, and it closed back below 4100 yesterday. 4070 is a key support area right now, and if that gets taken out we'd have to consider a pullback to test of the moving averages just above 4000, or even fill that open gap near 3975. No harm done yet, but yesterday's action felt a little different and the last two days we saw the indices close near the lows of the day. Something we haven't seen much of in a while.
The DWCPF (S-fund) took one on the chin yesterday after a morning rally failed. The bear flag is still in the picture and yesterday the 50-day EMA and descending trendline acted as resistance. The 1630 area at the bottom of the bear flag looks critical today.
BND (Bonds / F-fund) has been backing and filling after the big rally off the early March low. I'm seeing an inverted head and shoulders pattern and this may indicate higher prices for bonds and the F-fund as yields fall in anticipation of a possible recession.
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 so much 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.
