On Monday night and into Tuesday morning, the futures were holding up fairly well but once that CPI (Consumer Price Index) report came out at 8:30 AM ET, everything changed. Turnaround Tuesday? It was another hot inflation number with the CPI coming in at +5.4%, which was above the +5.0% expectations, and that gave the market a reason to sell off. The Dow dropped a modest 107-points and we saw similar losses percentage-wise in the S&P 500 and Nasdaq, but the more dollar / inflation sensitive small caps got whacked. Bonds were down as yields rallied, and the dollar was up strongly causing some pricing havoc.
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Here's a 30-minute chart of the S&P 500 futures and you can see at 8:30 AM ET (7:30 AM CT on this chart), when the CPI report was released, everything changed. There was even an intraday bull flag being formed right before the report was released and I'm sure day traders were leaning the wrong way and that may have added to the initial sell off during those 30-minutes after the report.
As you can see, the S&P futures did battle back and was actually positive in the first few hours after the stock market opened, but some technical damage was done, and the sellers came back.
The 10-year yields rallied sharply on the inflationary report and it closed back above 1.4% after several days below it. The trend is still down despite the recent reversal, and bond traders have been pushing yields back down on each rally, but there is room on the upside before it hits that purple moving average that is overhead.
The CPI report also gave the dollar some strength which puts pressure on prices, as we saw in the stock market, but because gold is generally an inflationary safe place, it was able to close in positive territory.
Surprisingly oil was up sharply as well so it wasn't like there were bets against the economy, so the battle here may be between an economy whose prices are running too hot - based on high inflationary data, and an economy that is struggling as the recent declines in yields may have been indicating. There has been no real winner yet.
I suppose yesterday's selling may have been a fear of a worst case scenario where the economy is not as strong as we thought, while inflation remains hotter than we want.
The S&P 500 (C-fund) has been very bullish lately, but very stretched, an as we talked about yesterday, it closed on Monday at exactly 100% above the March 2020 COVID crash lows. On Monday it rallied like it was unfazed by the move above resistance, but that may have changed on Turnaround Tuesday. There's support nearby but there is still a lot of room below. The S&P has continued to surprise to the upside, so let's see if it can pull another Houdini and get out of this mess.
The DWCPF (S-fund) took one on the chin after a bullish reversal late last week, and also a bullish reversal on Monday, but the CPI report proved too much for the small caps yesterday. Now this chart is back testing the 50-day EMA again, which has been spotty support in recent months. It holds sometimes, but not every time.
The EFA / I-fund was down yesterday and the rally in the dollar put some extra pressure on it. That bear flag doesn't look very inviting, but that 50-day EMA is the key. It has been pretty good support all year for the I-fund but it has been hanging around that area a little to long for comfort on this test.
The Dow Transportation Index also looks vulnerable as what looked like a bottoming positive reversal, is now meeting the bottom of that flag which held as resistance yesterday.
The BND (bonds / F-fund) took a hit with yields moving up on the CPI report. It is back in the rising channel and the top of the channel did not hold as support. But it did fill in that open gap which is what we want to see to clean up what it left behind. The question now is if it can bounce back now that the gap is filled.
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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Here's a 30-minute chart of the S&P 500 futures and you can see at 8:30 AM ET (7:30 AM CT on this chart), when the CPI report was released, everything changed. There was even an intraday bull flag being formed right before the report was released and I'm sure day traders were leaning the wrong way and that may have added to the initial sell off during those 30-minutes after the report.
As you can see, the S&P futures did battle back and was actually positive in the first few hours after the stock market opened, but some technical damage was done, and the sellers came back.
The 10-year yields rallied sharply on the inflationary report and it closed back above 1.4% after several days below it. The trend is still down despite the recent reversal, and bond traders have been pushing yields back down on each rally, but there is room on the upside before it hits that purple moving average that is overhead.
The CPI report also gave the dollar some strength which puts pressure on prices, as we saw in the stock market, but because gold is generally an inflationary safe place, it was able to close in positive territory.
Surprisingly oil was up sharply as well so it wasn't like there were bets against the economy, so the battle here may be between an economy whose prices are running too hot - based on high inflationary data, and an economy that is struggling as the recent declines in yields may have been indicating. There has been no real winner yet.
I suppose yesterday's selling may have been a fear of a worst case scenario where the economy is not as strong as we thought, while inflation remains hotter than we want.
The S&P 500 (C-fund) has been very bullish lately, but very stretched, an as we talked about yesterday, it closed on Monday at exactly 100% above the March 2020 COVID crash lows. On Monday it rallied like it was unfazed by the move above resistance, but that may have changed on Turnaround Tuesday. There's support nearby but there is still a lot of room below. The S&P has continued to surprise to the upside, so let's see if it can pull another Houdini and get out of this mess.
The DWCPF (S-fund) took one on the chin after a bullish reversal late last week, and also a bullish reversal on Monday, but the CPI report proved too much for the small caps yesterday. Now this chart is back testing the 50-day EMA again, which has been spotty support in recent months. It holds sometimes, but not every time.
The EFA / I-fund was down yesterday and the rally in the dollar put some extra pressure on it. That bear flag doesn't look very inviting, but that 50-day EMA is the key. It has been pretty good support all year for the I-fund but it has been hanging around that area a little to long for comfort on this test.
The Dow Transportation Index also looks vulnerable as what looked like a bottoming positive reversal, is now meeting the bottom of that flag which held as resistance yesterday.
The BND (bonds / F-fund) took a hit with yields moving up on the CPI report. It is back in the rising channel and the top of the channel did not hold as support. But it did fill in that open gap which is what we want to see to clean up what it left behind. The question now is if it can bounce back now that the gap is filled.
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.
