Stocks opened sharply lower on Wednesday after the Saudi National Bank, Credit Suisse’s largest investor, said that it could not provide additional funding for the struggling bank. We did see a move off the lows after the Swiss Central Bank said Credit Suisse was well capitalized and would step in if necessary. So, we saw some mixed results in the US indices in a day that was looking a lot worse in the morning. The Dow gave back 281 of the 338-points it gained on Tuesday while the Nasdaq closed positive. The dollar rallied sharply and the I-fund took a big hit on the European Banking issues. The European Central Bank will address this at their meeting today.
[TABLE="align: center"]
[TR]
[TD="align: center"]
[/TD]
[TD]
[/TD]
[TD="width: 338, align: center"] Daily TSP Funds Return
[TABLE="align: center"]
[TR]
[TD="align: right"][/TD]
[/TR]
[/TABLE]
[/TD]
[/TR]
[/TABLE]
First things, first. I want to thank TommyIV for filling in for me while I was out of town. He did a great job and it was nice to have him as a reliable backup while I was dealing with that out of town jury duty summons. I'm back home now and back on schedule. Thank you all for your patience.
I don't want to pretend that I understand everything that is going on, but from what I am hearing in a broader overview is that credit and monetary policy is getting tight, and liquidity is what makes money flow more freely and allows markets to work more easily. That's no longer the case.
I am also hearing that the problems are possibly isolated and banks in general are doing fine. Sure? Is that just coming from people heavily invested who need some time to liquidate their financial stock holdings?
I don't know for sure, but we did see a little stabilization yesterday in stocks yesterday, although the S-fund continues to get hit hard because of the heavy exposure the small regional bank stocks. Whether to avoid this fund because of this exposure, or to add because of the possibility of an overreaction as investors sell first, and ask questions later.
Yields have been plummeting as investors are starting to bet that the Fed will have to stop raising interest rates, and many ease off on their quantitative tightening. From a technical outlook, the 10-year yield flirted with the 200-day EMA for the last two days and held, but that is a sharp decline and I believe I heard it may have been the fasted move lower in such a short time since the 1987 market crash.
The dollar rallied sharply, briefly moved back above that key 200-day average, but closed below it again That rally, and the action in the European banks, sent EAFE Index and the I-find down 3% on the day. The high of the day did fill in an open gap (blue) before it flipped over to close near the lows of the day.
The 2-year Treasury, which is a key indicator for the Fed who tends to follow this year when determining their Fed Funds Rate, has been falling precipitously, and this is why many assume the Fed could be done raising rates, or perhaps just go one more 0.25% hike in next week's FOMC meeting.
This action is flattening the 2/10 year yield curve quite a bit. It is still inverted but now the 2-year is just 0.41 above the 10-year.
The move higher in the dollar did consumers a favor by helping push the price of oil down, and this whole banking debacle is elevating the chances of a recession so investors are assuming demand for oil may be driven down. This is a classic head and shoulders breakdown after a test of the middle of the head. Not the most common breakdown of an H&S, but it's not rare. This suggests we could see oil fall to 60 or lower in the coming weeks. That should help gasoline prices quite a bit.
The market atmosphere has certainly taken a turn since the January rally, but often the market gets oversold on the downside before a relief rally, but as I have experienced over the years, sometimes the market moves in one direction a lot longer than seems reasonable, so you never know. You can try to buy low and sell high, but they don't make it easy. You could get lucky, but frustration is more likely. That doesn't mean it won't work. It just doesn't work every day, especially with just two transfers each month.
Reminder! It's the last day to get in the TSP Talk March Madness Contest! It's that time of year again. Free Contest with Prizes for winners. Deadline is before today's first game. Join now or, click here for more information.
The S&P 500 (C-fund) has been chopping around in a wide range since the low made on Monday. It held on a closing basis in the descending channel, which of course is falling quickly. If you're looking to sell, perhaps you can wait for a move up to the top of that channel, but with it falling like that, there's no guarantees that the top of the channel will be higher than where it is now when it gets there. It also failed at the 200-day average (orange) on Tuesday. It's oversold and probably due for some relief, but as I said above, sometimes price action isn't reasonable.
The DWCPF (S-fund) has been crushed with its exposure to small bank stocks. So far it has held above the December low and we have seen two back to back closes meaningfully off the intraday lows. It may be trying to stabilize, or else the selling has just eased temporarily waiting for the next shoe the drop in the financials.
The EFA (I-fund) got crush yesterday with that 1% rally in the dollar and the European bank troubles. Today's ECB meeting could be interesting for this fund. How about an interest rate cut? Do they dare?
BND (bonds / F-fund) is filling in that right shoulder of the head and shoulders pattern. The question is, is that a right shoulder or will it keep going higher? With recession looking more like a reality, bonds could continue to do well, so this chart may tell us a whole lot about the economy in the coming week or so.
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.
[TABLE="align: center"]
[TR]
[TD="align: center"]
[TD]
[/TD]
[TD="width: 338, align: center"] Daily TSP Funds Return
[TR]
[TD="align: right"][/TD]
[/TR]
[/TABLE]
[/TD]
[/TR]
[/TABLE]
First things, first. I want to thank TommyIV for filling in for me while I was out of town. He did a great job and it was nice to have him as a reliable backup while I was dealing with that out of town jury duty summons. I'm back home now and back on schedule. Thank you all for your patience.
I don't want to pretend that I understand everything that is going on, but from what I am hearing in a broader overview is that credit and monetary policy is getting tight, and liquidity is what makes money flow more freely and allows markets to work more easily. That's no longer the case.
I am also hearing that the problems are possibly isolated and banks in general are doing fine. Sure? Is that just coming from people heavily invested who need some time to liquidate their financial stock holdings?
I don't know for sure, but we did see a little stabilization yesterday in stocks yesterday, although the S-fund continues to get hit hard because of the heavy exposure the small regional bank stocks. Whether to avoid this fund because of this exposure, or to add because of the possibility of an overreaction as investors sell first, and ask questions later.
Yields have been plummeting as investors are starting to bet that the Fed will have to stop raising interest rates, and many ease off on their quantitative tightening. From a technical outlook, the 10-year yield flirted with the 200-day EMA for the last two days and held, but that is a sharp decline and I believe I heard it may have been the fasted move lower in such a short time since the 1987 market crash.
The dollar rallied sharply, briefly moved back above that key 200-day average, but closed below it again That rally, and the action in the European banks, sent EAFE Index and the I-find down 3% on the day. The high of the day did fill in an open gap (blue) before it flipped over to close near the lows of the day.
The 2-year Treasury, which is a key indicator for the Fed who tends to follow this year when determining their Fed Funds Rate, has been falling precipitously, and this is why many assume the Fed could be done raising rates, or perhaps just go one more 0.25% hike in next week's FOMC meeting.
This action is flattening the 2/10 year yield curve quite a bit. It is still inverted but now the 2-year is just 0.41 above the 10-year.
The move higher in the dollar did consumers a favor by helping push the price of oil down, and this whole banking debacle is elevating the chances of a recession so investors are assuming demand for oil may be driven down. This is a classic head and shoulders breakdown after a test of the middle of the head. Not the most common breakdown of an H&S, but it's not rare. This suggests we could see oil fall to 60 or lower in the coming weeks. That should help gasoline prices quite a bit.
The market atmosphere has certainly taken a turn since the January rally, but often the market gets oversold on the downside before a relief rally, but as I have experienced over the years, sometimes the market moves in one direction a lot longer than seems reasonable, so you never know. You can try to buy low and sell high, but they don't make it easy. You could get lucky, but frustration is more likely. That doesn't mean it won't work. It just doesn't work every day, especially with just two transfers each month.
Reminder! It's the last day to get in the TSP Talk March Madness Contest! It's that time of year again. Free Contest with Prizes for winners. Deadline is before today's first game. Join now or, click here for more information.
The S&P 500 (C-fund) has been chopping around in a wide range since the low made on Monday. It held on a closing basis in the descending channel, which of course is falling quickly. If you're looking to sell, perhaps you can wait for a move up to the top of that channel, but with it falling like that, there's no guarantees that the top of the channel will be higher than where it is now when it gets there. It also failed at the 200-day average (orange) on Tuesday. It's oversold and probably due for some relief, but as I said above, sometimes price action isn't reasonable.
The DWCPF (S-fund) has been crushed with its exposure to small bank stocks. So far it has held above the December low and we have seen two back to back closes meaningfully off the intraday lows. It may be trying to stabilize, or else the selling has just eased temporarily waiting for the next shoe the drop in the financials.
The EFA (I-fund) got crush yesterday with that 1% rally in the dollar and the European bank troubles. Today's ECB meeting could be interesting for this fund. How about an interest rate cut? Do they dare?
BND (bonds / F-fund) is filling in that right shoulder of the head and shoulders pattern. The question is, is that a right shoulder or will it keep going higher? With recession looking more like a reality, bonds could continue to do well, so this chart may tell us a whole lot about the economy in the coming week or so.
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.
