For years the CPI has been a ho-hum report because inflation has not been any kind of concern. Now look what the CPI reports are doing to the stock market. The futures were up big before the release of the CPI and that got turned on its head after it was released and came in hotter than expected - maintaining a year over year gain of over 8% at +8.2%. The selling was fierce in the 90 minutes before the opening bell, but once the opening bell rang, the buyers stepped up.
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The biggest rallies come in bear markets, and we got a taste of that yesterday with the Dow reversing about 1300 points from low to high to close up 828-points. Because of all of the early selling with the S&P 500 down over 2%, we did get a lot of selling volume but by the close that had switched over to advancing volume and you can see below the positive breadth that created. The early selling may be the only reason we didn't see one of those 8, 9, or 10 to 1 positive ratio days.
The trading volume did tick up as we saw the S&P 500 (C-fund) trade over 3 billion shares. It was only the 3rd time that happened in the last 4+ months outside of the June and September quadruple witching days. The chart didn't break any overhead resistance so it could be easy for this to flip back over, but the positive outside reversal day, the move back above the June lows, and some open gaps above gives it some reason to hang on for at least a few days, if not more.
The year to date chart actually shows a possible door open to a move to the top of the longer term downtrend. That may be too much to ask, but it's not much of a stretch as we head into the positive seasonality of the mid-term election and holiday season. Of course the Fed will be eagerly raising rates the whole time making it less likely that gains can hold indefinitely, so I am still playing the short term game.
The yield on the 10-year Treasury ran right through the 4% area as the market opened, but it flipped over and closed well off that high creating a negative reversal day for yields. It did close up 0.05% tot 3.95%, but as long as it stays below 4%, the bulls should be happy with their stocks.
The yield on the 2-year Treasury was up sharply as well and closed at 4.44% so the inverted yield curve is still in the picture. That initial inversion in early April was a warning that a recession may be brewing, and since it inverted again in July and has remained inverted, a recession seems unavoidable, and possible here already, so it's tough to get too bullish.
The action was solid and maybe the big money traders will play some games in the coming days to scare out yesterday's buyers. They certainly took out a lot of stops below the prior lows when the market opened sharply lower, and that was a little panicky. But the chart formations and the extreme indicators are telling us that we were due for a playable move higher.
As I said yesterday, "another wave of selling could easily get me to add stocks to my account allocation for a trade." Well, I tried that yesterday morning when stocks were down sharply, but of course our 4+ hour delay made sure I didn't make that money yesterday as we have to buy the closing prices. Another obstacle when trying trade our TSP accounts.
The DWCPF (S-fund) lagged the large caps and that's not uncommon when there is a rush to buy. The bulls will gobble up the big names first and perhaps add some small caps later. But the other reason is, the CPI was very hot and that's not good for interest rates and small caps are more sensitive to interest rate movement.
The EFA (I-fund) went from a breakdown to gaining back 3 days worth of losses in a few hours. So technically the lows held on a closing basis, but like everything else we need to see some follow through before the bulls will get comfortable.
The BND (bonds / F-fund) also broke down when the yield on the 10-year T-note went above 4% but when that was reigned in and fell back below 4%, this reversed up to close with just a modest loss rather than taking a shellacking. I'd like to see this close above 70.50 for a day or two before considering the F-fund.
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. Have a great weekend!
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 biggest rallies come in bear markets, and we got a taste of that yesterday with the Dow reversing about 1300 points from low to high to close up 828-points. Because of all of the early selling with the S&P 500 down over 2%, we did get a lot of selling volume but by the close that had switched over to advancing volume and you can see below the positive breadth that created. The early selling may be the only reason we didn't see one of those 8, 9, or 10 to 1 positive ratio days.
The trading volume did tick up as we saw the S&P 500 (C-fund) trade over 3 billion shares. It was only the 3rd time that happened in the last 4+ months outside of the June and September quadruple witching days. The chart didn't break any overhead resistance so it could be easy for this to flip back over, but the positive outside reversal day, the move back above the June lows, and some open gaps above gives it some reason to hang on for at least a few days, if not more.
The year to date chart actually shows a possible door open to a move to the top of the longer term downtrend. That may be too much to ask, but it's not much of a stretch as we head into the positive seasonality of the mid-term election and holiday season. Of course the Fed will be eagerly raising rates the whole time making it less likely that gains can hold indefinitely, so I am still playing the short term game.
The yield on the 10-year Treasury ran right through the 4% area as the market opened, but it flipped over and closed well off that high creating a negative reversal day for yields. It did close up 0.05% tot 3.95%, but as long as it stays below 4%, the bulls should be happy with their stocks.
The yield on the 2-year Treasury was up sharply as well and closed at 4.44% so the inverted yield curve is still in the picture. That initial inversion in early April was a warning that a recession may be brewing, and since it inverted again in July and has remained inverted, a recession seems unavoidable, and possible here already, so it's tough to get too bullish.
The action was solid and maybe the big money traders will play some games in the coming days to scare out yesterday's buyers. They certainly took out a lot of stops below the prior lows when the market opened sharply lower, and that was a little panicky. But the chart formations and the extreme indicators are telling us that we were due for a playable move higher.
As I said yesterday, "another wave of selling could easily get me to add stocks to my account allocation for a trade." Well, I tried that yesterday morning when stocks were down sharply, but of course our 4+ hour delay made sure I didn't make that money yesterday as we have to buy the closing prices. Another obstacle when trying trade our TSP accounts.
The DWCPF (S-fund) lagged the large caps and that's not uncommon when there is a rush to buy. The bulls will gobble up the big names first and perhaps add some small caps later. But the other reason is, the CPI was very hot and that's not good for interest rates and small caps are more sensitive to interest rate movement.
The EFA (I-fund) went from a breakdown to gaining back 3 days worth of losses in a few hours. So technically the lows held on a closing basis, but like everything else we need to see some follow through before the bulls will get comfortable.
The BND (bonds / F-fund) also broke down when the yield on the 10-year T-note went above 4% but when that was reigned in and fell back below 4%, this reversed up to close with just a modest loss rather than taking a shellacking. I'd like to see this close above 70.50 for a day or two before considering the F-fund.
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. Have a great weekend!
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.
