After the bears hibernated for a couple of months, it's as if someone threw a switch to start the New Year. It was day two of the 2024 pullback as we saw moderate to sharp losses in most of the major indices yesterday. Mixed messages from the Fed had the Dow down 285-points while yields and the dollar were also mixed which muddied the waters a bit. However you slice it, the market was extended in the short term and this is not a surprise, but how long can it last?
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Where stocks go from here, no one can be certain but the recent market activity reminded us that even if you are correct in your analysis, the timing can be difficult. The straight up rally from the late October lows to the highs in late December was unsustainable, but when market extremes get alleviated is not always as easy to figure out. In this case it took a new week, a new month, and a new year to see the first meaningful pullback in more than two months, and the only thing that really changed from last week to this week was the calendar.
In yesterday's commentary I said if we got another loss "today" (meaning yesterday) I might have to repost the 1999-2000 chart. That's because that chart looks very similar to the current action so maybe it will tell us something about what we can expect going forward, and if does happen to continue t be similar, things could very interesting in the coming days.
After a tremendous rally from late October to the end of December in 1999, January of 2000 started with 2+ days of sharp selling before the dip buyers showed up. The losses in those first 2+ days wiped out all of December's gains before those buyers came in, and that was followed by a move back up to the December highs. And, just to throw investors another curveball, that was a peak that preceded a choppy 6-week decline.
The S&P 500 actually made it's way back to new highs in April of 2000, but that was a high that was never touched again until 7 years later in 2007. And of course, that high in 2007 became the high right before the 2008 financial crisis bear market began.
I'm not saying what will happen. I'm saying what could happen, and while history and the stock market rarely repeat themselves exactly, they do sometimes rhyme, and investor sentiment, emotions, and reactions are a good reason why that is the case. Let's see how investors react on day three of 2024.
The 10-year Treasury Yield rallied early, but the JOLTS employment report at 10 AM ET turned things around and the yield closed down on the day.
Conveniently, small open gaps above and below got filled on the chart yesterday, so now that they are tidied up, either direction is on the table going forward, although some overhead resistance held at yesterday's highs.
The dollar rallied for a second straight day but you can see that it is now facing a double dose of resistance in the 27.50 area. This is big as a break above that this week could be a deal breaker for the stock market, but if the resistance holds, the rally in stocks may resume.
Both the Russell 2000 and the Dow Transportation Index got hit hard again yesterday, and these are both quite interest rate and economically sensitive, and while both were due for a pullback, keeping an eye on the severity of these pullbacks could dictate what we're likely to see in the TSP stock funds. If they bounce near support, it may be an opportunity for those who have cash to do some buying, but like that 1999-2000 chart above suggests, the action could be volatile and being nimble may be the way to play it.
We will get the December Jobs Report on Friday and estimates are looking for a gain of approximately 162,000 new jobs and an unemployment rate of 3.8%.
The 2024 Guess the Dow Contest has started. The 2023 winner, Joblin20, received $100 Amazon e-Gift Card for guessing that the Dow would end 2023 the year at 37,55, and it closed at 37,650. If you want to get in on the 2024 contest, you can post your guess in the Forum by this coming Sunday evening. See this post for more information. https://www.tsptalk.com/mb/site-news-and-announcements/41743-guess-dow-contest-2024-a.html
The 2023 AutoTracker Winners, who had some crazy good returns last year, have been posted in the forum.
You you can follow the leaders all year with a daily emailed report to see where these leaders and / or other TSP participants are moving their money, and when they are making the moves with the Last Look Report service. More on that: Last Look Report.
The S&P 500 (C-fund) is now on day three of the pullback and on the south side of the broken support line. The 20-day EMA was tested and held yesterday. The PMO Indicator is crossing below its moving average suggesting a very short-term oversold condition? It wouldn't be a surprise to see buyers step up here, but that's no guarantee that any bounce will be sold shortly afterward. A test of the 50-day average may be more believable as a possible end to a pullback, although those open gaps are also potential targets.
DWCPF (S-fund) was a couple of days behind the S&P 500 as it finally fell below its rising support line yesterday, and it also filled in one of its open gaps.
EFA (I-fund) took another hard hit yesterday and the recent strength in the dollar is helping push it lower, but as I mentioned above, the dollar may be testing some overhead resistance again today, and that could make or break this chart. It's not shown, but this also held after a test of its 20-day EMA which is currently 73.71.
BND (bonds / F-fund) rallied after an initial sell off yesterday and an attempted fill of an open gap. The rising support line broke but the bounce back already has it testing that support as potential resistance.
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
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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Where stocks go from here, no one can be certain but the recent market activity reminded us that even if you are correct in your analysis, the timing can be difficult. The straight up rally from the late October lows to the highs in late December was unsustainable, but when market extremes get alleviated is not always as easy to figure out. In this case it took a new week, a new month, and a new year to see the first meaningful pullback in more than two months, and the only thing that really changed from last week to this week was the calendar.
In yesterday's commentary I said if we got another loss "today" (meaning yesterday) I might have to repost the 1999-2000 chart. That's because that chart looks very similar to the current action so maybe it will tell us something about what we can expect going forward, and if does happen to continue t be similar, things could very interesting in the coming days.
After a tremendous rally from late October to the end of December in 1999, January of 2000 started with 2+ days of sharp selling before the dip buyers showed up. The losses in those first 2+ days wiped out all of December's gains before those buyers came in, and that was followed by a move back up to the December highs. And, just to throw investors another curveball, that was a peak that preceded a choppy 6-week decline.
The S&P 500 actually made it's way back to new highs in April of 2000, but that was a high that was never touched again until 7 years later in 2007. And of course, that high in 2007 became the high right before the 2008 financial crisis bear market began.
I'm not saying what will happen. I'm saying what could happen, and while history and the stock market rarely repeat themselves exactly, they do sometimes rhyme, and investor sentiment, emotions, and reactions are a good reason why that is the case. Let's see how investors react on day three of 2024.
The 10-year Treasury Yield rallied early, but the JOLTS employment report at 10 AM ET turned things around and the yield closed down on the day.
Conveniently, small open gaps above and below got filled on the chart yesterday, so now that they are tidied up, either direction is on the table going forward, although some overhead resistance held at yesterday's highs.
The dollar rallied for a second straight day but you can see that it is now facing a double dose of resistance in the 27.50 area. This is big as a break above that this week could be a deal breaker for the stock market, but if the resistance holds, the rally in stocks may resume.
Both the Russell 2000 and the Dow Transportation Index got hit hard again yesterday, and these are both quite interest rate and economically sensitive, and while both were due for a pullback, keeping an eye on the severity of these pullbacks could dictate what we're likely to see in the TSP stock funds. If they bounce near support, it may be an opportunity for those who have cash to do some buying, but like that 1999-2000 chart above suggests, the action could be volatile and being nimble may be the way to play it.
We will get the December Jobs Report on Friday and estimates are looking for a gain of approximately 162,000 new jobs and an unemployment rate of 3.8%.
The 2024 Guess the Dow Contest has started. The 2023 winner, Joblin20, received $100 Amazon e-Gift Card for guessing that the Dow would end 2023 the year at 37,55, and it closed at 37,650. If you want to get in on the 2024 contest, you can post your guess in the Forum by this coming Sunday evening. See this post for more information. https://www.tsptalk.com/mb/site-news-and-announcements/41743-guess-dow-contest-2024-a.html
The 2023 AutoTracker Winners, who had some crazy good returns last year, have been posted in the forum.
You you can follow the leaders all year with a daily emailed report to see where these leaders and / or other TSP participants are moving their money, and when they are making the moves with the Last Look Report service. More on that: Last Look Report.
The S&P 500 (C-fund) is now on day three of the pullback and on the south side of the broken support line. The 20-day EMA was tested and held yesterday. The PMO Indicator is crossing below its moving average suggesting a very short-term oversold condition? It wouldn't be a surprise to see buyers step up here, but that's no guarantee that any bounce will be sold shortly afterward. A test of the 50-day average may be more believable as a possible end to a pullback, although those open gaps are also potential targets.
DWCPF (S-fund) was a couple of days behind the S&P 500 as it finally fell below its rising support line yesterday, and it also filled in one of its open gaps.
EFA (I-fund) took another hard hit yesterday and the recent strength in the dollar is helping push it lower, but as I mentioned above, the dollar may be testing some overhead resistance again today, and that could make or break this chart. It's not shown, but this also held after a test of its 20-day EMA which is currently 73.71.
BND (bonds / F-fund) rallied after an initial sell off yesterday and an attempted fill of an open gap. The rising support line broke but the bounce back already has it testing that support as potential resistance.
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
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.
