Stocks opened higher despite a weaker than expected jobless claims report, but as the day wore on, and the closer we got to today's speech from Jerome Powell in Jackson Hole, stocks stalled and rolled over near the prior highs. Is this just a temporary, typical double top pullback, or did the negative outside reversal day mean something more troubling? Bonds were down as yields and the dollar rallied - for some reason. Normally weaker data will pull yields and the dollar down, so something else may be going on.
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The Weekly Jobless Claims came in higher than expected with a slight upward revision to last month. Higher numbers in this economic report are bad (more jobless claims.) The initial reaction after the report was modestly positive, but obviously that changed by the close.
Last week the market rallied big of the lower than expected jobless claims, so it makes sense that it fell on higher than expected jobless claims - if that is why it fell.
I guess the question I have, and I may have missed something, why did the 10-year Treasury Yield move up sharply yesterday on this "miss"? It was also up big last Thursday on the beat. (See the blue arrows.)
The dollar was also rebounding yesterday despite the weaker than expected jobs data. However, both yields and the dollar may have been due for some relief. It was just a strange time for it to happen. Both charts did rally up toward some potential resistance so we'll just have to wait and see how they react to the Fed today.
It hasn't always been the case in this inflationary world that really impacted bond yields, but very typically the price of oil tends to move with the 10-year Treasury yield, and the reason for that is the economy. If there's a strong economy, demand for oil is up, and bond yields also tend to move up to keep things from over heating. When demand for oil is down, it could be because the economy is weakening, and when the economy weakens, yields tend to go lower.
So, that was true yesterday and in recent weeks. The 10-year yield was up and the price of oil was up. But why if the jobs data was weaker than expected? Whatever the reason, I still expect the two to move closely in tandem. By the way, why is oil near its lows with the conflict in the Middle East?
With Jerome Powell set to speak at 10 AM ET today, I don't want to do much speculating on what he'll say, but the charts suggest a pullback is due. Not that the S&P will plummet back to the lows, but being at a double top, it may be looking for an excuse to do some backing a filling. What could he say at this point that would surprise us unless he gives a hawkish spin on the situation, which is not expected?
We have some decent seasonality data next week, although it is weaker during election years. And come September, the seasonality chart gets about as bad as you see all year, particularly during election years. How cute do we want to get with that info?
The S&P 500 (C-fund) was up early and closed weakly and that created another one of those negative outside reversal days. We don't usually get them often but we have seen several in the last few months. In general, we can expect some weakness, or perhaps some sideways action at best, for a few days. As we've talked about before, in July 2023 a negative outside reversal day marked the peak for the market so it's something to keep an eye on if this can't get back above yesterday's high quickly.
The DWCPF (S-fund) is just so volatile. When stocks are up, this has been leading on the upside. When stocks are down, this one lags. We have an open gap near 2040, but support has been holding so far near 2080. If you're in the S-fund you know you have to expect bigger swings and the risk / reward ratio is magnified.
The EFA (I-fund) made a new high early yesterday but the rally in the dollar spoiled that and we ended up with a negative outside reversal day here as well. There are a lot of open gaps below.
BND (F-fund) broke a 4-day winning streak after its double top pullback, but it remains in that short-term ascending channel.
Thanks so much for reading! Have a great weekend!
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
Questions, comments, or issues with today's commentary? We can discuss it in the Forum.
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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 Weekly Jobless Claims came in higher than expected with a slight upward revision to last month. Higher numbers in this economic report are bad (more jobless claims.) The initial reaction after the report was modestly positive, but obviously that changed by the close.
Last week the market rallied big of the lower than expected jobless claims, so it makes sense that it fell on higher than expected jobless claims - if that is why it fell.
I guess the question I have, and I may have missed something, why did the 10-year Treasury Yield move up sharply yesterday on this "miss"? It was also up big last Thursday on the beat. (See the blue arrows.)
The dollar was also rebounding yesterday despite the weaker than expected jobs data. However, both yields and the dollar may have been due for some relief. It was just a strange time for it to happen. Both charts did rally up toward some potential resistance so we'll just have to wait and see how they react to the Fed today.
It hasn't always been the case in this inflationary world that really impacted bond yields, but very typically the price of oil tends to move with the 10-year Treasury yield, and the reason for that is the economy. If there's a strong economy, demand for oil is up, and bond yields also tend to move up to keep things from over heating. When demand for oil is down, it could be because the economy is weakening, and when the economy weakens, yields tend to go lower.
So, that was true yesterday and in recent weeks. The 10-year yield was up and the price of oil was up. But why if the jobs data was weaker than expected? Whatever the reason, I still expect the two to move closely in tandem. By the way, why is oil near its lows with the conflict in the Middle East?
With Jerome Powell set to speak at 10 AM ET today, I don't want to do much speculating on what he'll say, but the charts suggest a pullback is due. Not that the S&P will plummet back to the lows, but being at a double top, it may be looking for an excuse to do some backing a filling. What could he say at this point that would surprise us unless he gives a hawkish spin on the situation, which is not expected?
We have some decent seasonality data next week, although it is weaker during election years. And come September, the seasonality chart gets about as bad as you see all year, particularly during election years. How cute do we want to get with that info?
The S&P 500 (C-fund) was up early and closed weakly and that created another one of those negative outside reversal days. We don't usually get them often but we have seen several in the last few months. In general, we can expect some weakness, or perhaps some sideways action at best, for a few days. As we've talked about before, in July 2023 a negative outside reversal day marked the peak for the market so it's something to keep an eye on if this can't get back above yesterday's high quickly.
The DWCPF (S-fund) is just so volatile. When stocks are up, this has been leading on the upside. When stocks are down, this one lags. We have an open gap near 2040, but support has been holding so far near 2080. If you're in the S-fund you know you have to expect bigger swings and the risk / reward ratio is magnified.
The EFA (I-fund) made a new high early yesterday but the rally in the dollar spoiled that and we ended up with a negative outside reversal day here as well. There are a lot of open gaps below.
BND (F-fund) broke a 4-day winning streak after its double top pullback, but it remains in that short-term ascending channel.
Thanks so much for reading! Have a great weekend!
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
Questions, comments, or issues with today's commentary? We can discuss it in the Forum.
Daily Market Commentary Archives
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.
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.
