Stocks opened higher on Thursday after the hotter than expected CPI report was released, but that didn't last long as the selling started immediately and within a couple of hours the S&P 500 was down 44-points or about 1%. Then, just as quickly as it reversed down, buying kicked in and the S&P went positive just and closed down just 3-points. That afternoon rally created several positive outside reversal patterns on the chart. That sounds really bullish, but we'll revisit the chart of January 2000 before making that call.
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With the stock market already convinced that inflation was no longer a problem, there was certainly room for disappointment, and the hotter than expected CPI gave investors a reason to sell yesterday. It turned out to be a very volatile day as the dip buyers showed up after lunch and took some indices into positive territory, or close to it. That's a pretty good sign of strength but it brings me back to the dreaded January 2000 chart that I have been posting often lately because of the chilling comparison to the current chart.
I don't think I need much content or context to describe what we're seeing here - right down to yesterday's positive reversal day, the late 1999 / January 2000 chart comparison is still in play.
And here's a reminder of what happened in the weeks following the start of 2000, and of course a nearly 3 year bear market was just getting started.
Not that we will see a similar result but charts are made up of a combination of investors' expectations, emotions, and sentiment, and that's how they reacted to the 1999 - 2000 chart set up.
The small caps lagged again on Thursday so those broader indices took the advance / decline numbers down for the day as declining issues outpaced advancers by about 3 to 2 and trading volume was about 3 to 1 in favor of declining volume.
Banks start reporting earnings today and this bank index chart looks like it is in a now or never technical picture as it just broke below the rising support line on Wednesday, and yesterday was the first close below it. It also had a positive reversal day yesterday which is usually a bullish sign for at least the very short-term, but bank earnings and guidance should have more of an impact on this chart than the rear-view mirror action of the December CPI inflation data.
The 10-year Treasury Yield was down yesterday, which couldn't be more confusing if you believe yields move up on stronger than expected economic data, which is what the CPI report suggested. The reason stocks sold off initially on Thursday was because it put a kibosh on the idea that the Fed is going to cut interest rates 5 or 6 times this year, as the market had priced in. But instead the yield was down as the chart might have suggested with the 200-day EMA keeping a cap on it for now, and stocks liked that.
The dollar tried to break above that 50-day EMA, and it made it temporarily, but by the close it was just a little better than flat on the day. The early rally and the overseas market reacting to the early US sell off put a lot of pressure on the I-fund's international markets. The EFA bounced back but it's always a matter of whether the TSP managers price that late US action into the I-fund, or if they go with the overseas market index results, and adjust today. That 20-day EMA sure held firmly here.
We'll get the PPI report (Producer Prices) this morning, which may not be as much of a market mover as the CPI was, but it can still be impactful if it misses estimates.
Holiday Closing: Per tsp.gov: "Some financial markets will be closed on Monday, January 15, in observance of Martin Luther King Jr. Day. The Thrift Savings Plan will also be closed. Transactions that would have been processed Monday night (January 15) will be processed Tuesday night (January 16) at Tuesday's closing share prices."
So, we will not be posting commentaries on Monday.
Admin note - last days! Thanks so much for the great response to our sale prices so far! We are celebrating our 20th anniversary this month and we're offering a discount on our annual subscriptions this week to new and current subscribers. You can sign up to a new service or add a year or two (in some cases) to your current subscription for 20% off the regular price (or 50% in some cases.)
Sales ends Saturday! Thanks!
Use this link for more information: [url]https://www.tsptalk.com/annual_sub_sale.php
[/URL]
The S&P 500 (C-fund) opened higher, hit the December highs and started to pullback furiously yesterday. The pullback was typical action but the initial opening rally, then the strong close would not be what I expected. This looks pretty good here but double tops can mean a bit of a pause or pullback, although we just had one. With all-time highs just over 4800 this might be considered a triple top, but that high was made over two years ago so this may be all part of a bigger double top. If we do see new highs, we could see a rush of people buying who are nervous about getting in here just below that resistance.
DWCPF (S-fund) was lagging on the hotter than expected data which likely means fewer, if any, interest rate cuts this year. Small caps depend on borrowing for growth more than large caps, so they are more vulnerable to this data, but again yields moved lower yesterday for some reason. The bear flag is a concern but the 20-day EMA has held on a closing basis for a 4th day in a row.
BND (bonds / F-fund) plowed higher despite the strong CPI data. That's a head scratcher and it's either something that we will see reverse quickly, or bonds are stronger than we may think.
Thanks so much for reading! Enjoy your MLK holiday weekend, and we'll see you on Tuesday!
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
For more info our other premium services, please go here... www.tsptalk.com/premiums.html
Daily Market Commentary Archives
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.
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[TD="width: 338, align: center"] Daily TSP Funds Return
[TR]
[TD="align: right"][/TD]
[/TR]
[/TABLE]
[/TD]
[/TR]
[/TABLE]
With the stock market already convinced that inflation was no longer a problem, there was certainly room for disappointment, and the hotter than expected CPI gave investors a reason to sell yesterday. It turned out to be a very volatile day as the dip buyers showed up after lunch and took some indices into positive territory, or close to it. That's a pretty good sign of strength but it brings me back to the dreaded January 2000 chart that I have been posting often lately because of the chilling comparison to the current chart.
I don't think I need much content or context to describe what we're seeing here - right down to yesterday's positive reversal day, the late 1999 / January 2000 chart comparison is still in play.
And here's a reminder of what happened in the weeks following the start of 2000, and of course a nearly 3 year bear market was just getting started.
Not that we will see a similar result but charts are made up of a combination of investors' expectations, emotions, and sentiment, and that's how they reacted to the 1999 - 2000 chart set up.
The small caps lagged again on Thursday so those broader indices took the advance / decline numbers down for the day as declining issues outpaced advancers by about 3 to 2 and trading volume was about 3 to 1 in favor of declining volume.
Banks start reporting earnings today and this bank index chart looks like it is in a now or never technical picture as it just broke below the rising support line on Wednesday, and yesterday was the first close below it. It also had a positive reversal day yesterday which is usually a bullish sign for at least the very short-term, but bank earnings and guidance should have more of an impact on this chart than the rear-view mirror action of the December CPI inflation data.
The 10-year Treasury Yield was down yesterday, which couldn't be more confusing if you believe yields move up on stronger than expected economic data, which is what the CPI report suggested. The reason stocks sold off initially on Thursday was because it put a kibosh on the idea that the Fed is going to cut interest rates 5 or 6 times this year, as the market had priced in. But instead the yield was down as the chart might have suggested with the 200-day EMA keeping a cap on it for now, and stocks liked that.
The dollar tried to break above that 50-day EMA, and it made it temporarily, but by the close it was just a little better than flat on the day. The early rally and the overseas market reacting to the early US sell off put a lot of pressure on the I-fund's international markets. The EFA bounced back but it's always a matter of whether the TSP managers price that late US action into the I-fund, or if they go with the overseas market index results, and adjust today. That 20-day EMA sure held firmly here.
We'll get the PPI report (Producer Prices) this morning, which may not be as much of a market mover as the CPI was, but it can still be impactful if it misses estimates.
Holiday Closing: Per tsp.gov: "Some financial markets will be closed on Monday, January 15, in observance of Martin Luther King Jr. Day. The Thrift Savings Plan will also be closed. Transactions that would have been processed Monday night (January 15) will be processed Tuesday night (January 16) at Tuesday's closing share prices."
So, we will not be posting commentaries on Monday.
Admin note - last days! Thanks so much for the great response to our sale prices so far! We are celebrating our 20th anniversary this month and we're offering a discount on our annual subscriptions this week to new and current subscribers. You can sign up to a new service or add a year or two (in some cases) to your current subscription for 20% off the regular price (or 50% in some cases.)
Sales ends Saturday! Thanks!
Use this link for more information: [url]https://www.tsptalk.com/annual_sub_sale.php
[/URL]
The S&P 500 (C-fund) opened higher, hit the December highs and started to pullback furiously yesterday. The pullback was typical action but the initial opening rally, then the strong close would not be what I expected. This looks pretty good here but double tops can mean a bit of a pause or pullback, although we just had one. With all-time highs just over 4800 this might be considered a triple top, but that high was made over two years ago so this may be all part of a bigger double top. If we do see new highs, we could see a rush of people buying who are nervous about getting in here just below that resistance.
DWCPF (S-fund) was lagging on the hotter than expected data which likely means fewer, if any, interest rate cuts this year. Small caps depend on borrowing for growth more than large caps, so they are more vulnerable to this data, but again yields moved lower yesterday for some reason. The bear flag is a concern but the 20-day EMA has held on a closing basis for a 4th day in a row.
BND (bonds / F-fund) plowed higher despite the strong CPI data. That's a head scratcher and it's either something that we will see reverse quickly, or bonds are stronger than we may think.
Thanks so much for reading! Enjoy your MLK holiday weekend, and we'll see you on Tuesday!
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
For more info our other premium services, please go here... www.tsptalk.com/premiums.html
Daily Market Commentary Archives
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.
