Stocks opened sharply lower on Wednesday after a hotter than expected CPI inflation report. That didn't stop dip buyers from attempting to buy into that morning weakness and the indices closed well off their lows, including a gain for the Nasdaq. The move didn't exactly clear up the current choppy market action, but it did push yields sharply higher. The I-fund shook off the data and closed positive on the day, while the higher yields had small caps lagging again.
You can see the latest updated TSP share prices and returns, usually posted daily by 8:30 PM ET here: https://www.tsptalk.com/tsp_share_prices.php
Jerome Powell was in front of congress again yesterday. I watched some of it and unfortunately, rather than asking about the CPI data and his current outlook, most of the questions he was given was either along the lines of, why did you screw up inflation the last two years, or political in nature. He didn't really take the bait on either, but perhaps because he didn't react to the CPI, investors took it as a positive.
The bond market didn't however. Bonds fell sharply as the 10-year Yield, which moved above resistance on Tuesday, took off on the CPI data yesterday. "Took off" may be a little harsh because it is still off the January highs, and...
... it has been trading in a range for a long time now. But the level of yields isn't as concerning to the stock market as the speed at which yields are moving, and that was a pretty big one day move yesterday.
The probability of an interest rate cut by the May FOMC meeting fell again as the odds that it holds where the rate is now went from 78% to 87%. A week ago it was just 59% so the market has basically been pricing in a good chance of no move by May and a cut has been pushed out closer to the September meeting.
Today we'll get the PPI report and it could confirm yesterday's inflation scare, or maybe it doesn't? We've seen that happen before, and the fact that investors weren't overly concerned judging by those muted losses yesterday, perhaps the PPI will appease them.
As we'll see in the TSP Fund charts down below, not much has changed, and there was actually a positive breakout in the I-fund, but old school investors who view the Dow Transportation Index as the market leader have to be getting concerned when looking at this chart.
This is as vulnerable as it gets for a chart hanging onto support. That's a bearish head and and shoulders pattern (red) within the right shoulder of a larger head and shoulders pattern, sitting atop of the 200-day EMA, which is often consider the fence between a bull market and a bear market. The broader market often, not always, follows this leader as it is a good indication of economic strength or weakness. This has breakdown written all over it, but it hasn't yet.
As I have been saying, seasonality is on the bulls' side this week and perhaps that accounted for the modest reaction to the hot inflation data. The VIX was also down, meaning there was no fear in the air yesterday despite the losses. Again, next week the seasonality picture gets much more bearish and the market may have more of a headwind to deal with.
Holiday Closing: According to tsp.gov, "some financial markets will be closed on Monday, February 17, in observance of Washington’s Birthday (President’s Day). The Thrift Savings Plan will also be closed. Transactions that would have been processed Monday night (February 17) will be processed Tuesday night (February 18) at Tuesday's closing share prices."
The S&P 500 (C-fund) was down, but not out yesterday as the orange bull flag continues to hold up. Unfortunately, so does the double top near 6100. That's another positive kangaroo tail reversal like we saw on February 3rd. It had fallen below, but closed back above, the 20-day EMA yesterday after flirting with a test of the 50-day EMA, which has been holding for the last month. This looks pretty good but until it breaks above about 6080 or 6100, there's a chance of at least another test of the bottom of that bull flag.
DWCPF (S-fund) was slammed early and it may have completed a successful test of that prior February 3 low. It could also be a flag, but bull flags tend to slant down like we see on the S&P 500 chart above. The decline did break below the 50-day EMA and the rising support line off the January 13 low, so that's a warning sign, and it may need to recapture the 2370 area where it could meet with some resistance.
ACWX (the I-fund tracking index) may have become the leader in 2025, after it had probably become the least liked fund for some time. It closed above that triple top, which could be opening the door for more upside if it can confirm the breakout for 3+ closes above 55.
BND / F-fund was down sharply after its failed breakout earlier this month. The decline did help it fill one of the open gaps (blue) and the 200-day EMA is just below that. However, there is still a large open gap (red) below that could need filling so that support must hold. Watch for the reaction to today's PPI report. This may just be a pullback to support to clean up the chart.
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
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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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Jerome Powell was in front of congress again yesterday. I watched some of it and unfortunately, rather than asking about the CPI data and his current outlook, most of the questions he was given was either along the lines of, why did you screw up inflation the last two years, or political in nature. He didn't really take the bait on either, but perhaps because he didn't react to the CPI, investors took it as a positive.
The bond market didn't however. Bonds fell sharply as the 10-year Yield, which moved above resistance on Tuesday, took off on the CPI data yesterday. "Took off" may be a little harsh because it is still off the January highs, and...
... it has been trading in a range for a long time now. But the level of yields isn't as concerning to the stock market as the speed at which yields are moving, and that was a pretty big one day move yesterday.
The probability of an interest rate cut by the May FOMC meeting fell again as the odds that it holds where the rate is now went from 78% to 87%. A week ago it was just 59% so the market has basically been pricing in a good chance of no move by May and a cut has been pushed out closer to the September meeting.
Today we'll get the PPI report and it could confirm yesterday's inflation scare, or maybe it doesn't? We've seen that happen before, and the fact that investors weren't overly concerned judging by those muted losses yesterday, perhaps the PPI will appease them.
As we'll see in the TSP Fund charts down below, not much has changed, and there was actually a positive breakout in the I-fund, but old school investors who view the Dow Transportation Index as the market leader have to be getting concerned when looking at this chart.
This is as vulnerable as it gets for a chart hanging onto support. That's a bearish head and and shoulders pattern (red) within the right shoulder of a larger head and shoulders pattern, sitting atop of the 200-day EMA, which is often consider the fence between a bull market and a bear market. The broader market often, not always, follows this leader as it is a good indication of economic strength or weakness. This has breakdown written all over it, but it hasn't yet.
As I have been saying, seasonality is on the bulls' side this week and perhaps that accounted for the modest reaction to the hot inflation data. The VIX was also down, meaning there was no fear in the air yesterday despite the losses. Again, next week the seasonality picture gets much more bearish and the market may have more of a headwind to deal with.
Holiday Closing: According to tsp.gov, "some financial markets will be closed on Monday, February 17, in observance of Washington’s Birthday (President’s Day). The Thrift Savings Plan will also be closed. Transactions that would have been processed Monday night (February 17) will be processed Tuesday night (February 18) at Tuesday's closing share prices."
The S&P 500 (C-fund) was down, but not out yesterday as the orange bull flag continues to hold up. Unfortunately, so does the double top near 6100. That's another positive kangaroo tail reversal like we saw on February 3rd. It had fallen below, but closed back above, the 20-day EMA yesterday after flirting with a test of the 50-day EMA, which has been holding for the last month. This looks pretty good but until it breaks above about 6080 or 6100, there's a chance of at least another test of the bottom of that bull flag.
DWCPF (S-fund) was slammed early and it may have completed a successful test of that prior February 3 low. It could also be a flag, but bull flags tend to slant down like we see on the S&P 500 chart above. The decline did break below the 50-day EMA and the rising support line off the January 13 low, so that's a warning sign, and it may need to recapture the 2370 area where it could meet with some resistance.
ACWX (the I-fund tracking index) may have become the leader in 2025, after it had probably become the least liked fund for some time. It closed above that triple top, which could be opening the door for more upside if it can confirm the breakout for 3+ closes above 55.
BND / F-fund was down sharply after its failed breakout earlier this month. The decline did help it fill one of the open gaps (blue) and the 200-day EMA is just below that. However, there is still a large open gap (red) below that could need filling so that support must hold. Watch for the reaction to today's PPI report. This may just be a pullback to support to clean up the chart.
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
Questions, comments, or issues with today's commentary? We can discuss it in the Forum.
Daily Market Commentary Archives
For more info our other premium services, please go here... www.tsptalk.com/premiums.php
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.
