The Fed gaveth, and the bear tooketh away. Another bloodbath type of sell off on Thursday, just as the Fed driven rally on Wednesday dragged a bunch of people back into the market. The Dow had another 4-digit day with a 1063-point loss. We tested the 2022 lows again, and at some point that may give out, but we're seeing enough extremes (94% downside volume yesterday) that the downside may be getting exhausted. One thing that may surprise you after yesterday's collapse - the S&P 500 is actually still up for the week, +0.36%, so it's really been just a flat week. 
[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]
Some follow up on the breakout in the Dow Transportation Index on Wednesday, which had closed above its key moving averages and was potentially telling the rest of the market that this market leader may be getting to rally again: Fast forward a day and it is back below the 50 and 200-day EMAs. The longer it consolidates in the right shoulder of what looks like a head and shoulders pattern, the greater the possibility that this could break to the downside. So, it needs to find some traction soon, get back above those averages and the top of that shoulder, or it could get even uglier.
One back-handed positive yesterday was just how bad the action was. It's rare to see trading volume at 9 or 10 to 1 in favor of decliners, but yesterday that was the case. The NYSE saw close to 95% volume on the downside yesterday, compared to up. Not that the market will reverse right away, but a day or two of those numbers usually comes very close to a market low.
CNBC had another "Markets in Turmoil" special last night so we should be getting pretty close to another playable bounce.
We will get the April jobs report this morning (Friday) with estimates of a gain of 400,000 jobs, and an unemployment rate of 3.6%.
The S&P 500 (C-fund) took a dive after the Fed rally on Wednesday, retracing all of those gains, plus some. It's kind of surprising that it is actually still up modestly for the week, but once again a 2 - 3 day rally in a bearish market should have been sold. Now the chart sits near the recent lows and it is possibly carving out a short-term bottom like we saw in February and March. If that is the case, we would see some green in the indices today because anymore downside would be potentially making new lows.
DWCPF (S-fund / small caps) is in the same situation with some signs of similar bottoming action, but perhaps we are due for a capitulation-like sell off where investors give up and sell at any price, just to stop the pain. That usually precedes a rebound, but it could be ugly while it's happening.
The EFA (I-fund) was down big with the rest of the indices, and the bounce back in the dollar didn't help. There was a stealth gap filled yesterday. Its one of those gaps that don't show up as well on the charts, but the close on March 8th was near 67.40 and the next day's low was 69.15, so that was a form of a gap. It had been partially filled by a few down days, but only yesterday did it get fully filled.
BND (bonds / F-fund) resumed its down side after the fake out reversal on Wednesday. The downtrend continues and it's why we may need to see a break above resistance before considering any trade here.
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. Have a great weekend!
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]
It's not just the dumb money or buy and holders that are getting crushed recently. It's market timers who may have been buying the bottom of the recent trading ranges and many may have started buying recently and jumped on Wednesday's Fed driven really. It's also professional money managers - just look at Cathy Woods' ARKK Fund which invests in high tech. Her fund was down almost 10% yesterday alone, and somewhere in the high 60% area for the year. They don't make it easy for anybody, whoever "they" are.
The people in cash or bonds aren't making money either. Being in cash is a losing battle with this inflation, although not to the degree of the losses in stocks, and we know what's happened to the bond market this year.
The people making money are most likely the perma-bears who have been calling for something like this for a long time, or traders who are able to short stocks and funds. That's not TSP participants so there's not a lot of smiling faces out there right now.
We've talked often about the theory of buying fear and selling euphoria, and the last two days were a microcosm of that playing out with those 1000-point swings. Where does this action put us in the cycle of emotions?
As bad as it was yesterday, I don't think we've had the capitulation phase yet. That's a broad look, and I believe there are similar smaller cycles within the large cycle, and while we could see short-term capitulation that leads to a short term rally, the bear market as a whole may only be somewhere between Fear and Panic.
Those of you know me, know that I think that there are a lot of games played by the big money. They were either trying to fool us on Wednesday, or yesterday. I don't claim to know what they're doing. It's just tough to explain the bullishness and explosion in stocks and bonds one day, and 17 hours later, without much change in the situation, the gains are evaporated. It's some kind of game as they try to push the smaller money around. It can get so frustrating and we do hear, as it says below capitulation on the chart, "Maybe the markets just aren't for me", from the herd of folks who aren't used to this kind of action.
As "toppy" as yields looked after the Fed took 0.75% interest rates hikes off the table, they reversed back up as well yesterday making new highs. The dollar also flipped back to the upside and had a big gain, but it closed off its highs as it tested that 5-year triple top that I showed yesterday.The people in cash or bonds aren't making money either. Being in cash is a losing battle with this inflation, although not to the degree of the losses in stocks, and we know what's happened to the bond market this year.
The people making money are most likely the perma-bears who have been calling for something like this for a long time, or traders who are able to short stocks and funds. That's not TSP participants so there's not a lot of smiling faces out there right now.
We've talked often about the theory of buying fear and selling euphoria, and the last two days were a microcosm of that playing out with those 1000-point swings. Where does this action put us in the cycle of emotions?
As bad as it was yesterday, I don't think we've had the capitulation phase yet. That's a broad look, and I believe there are similar smaller cycles within the large cycle, and while we could see short-term capitulation that leads to a short term rally, the bear market as a whole may only be somewhere between Fear and Panic.
Those of you know me, know that I think that there are a lot of games played by the big money. They were either trying to fool us on Wednesday, or yesterday. I don't claim to know what they're doing. It's just tough to explain the bullishness and explosion in stocks and bonds one day, and 17 hours later, without much change in the situation, the gains are evaporated. It's some kind of game as they try to push the smaller money around. It can get so frustrating and we do hear, as it says below capitulation on the chart, "Maybe the markets just aren't for me", from the herd of folks who aren't used to this kind of action.
Some follow up on the breakout in the Dow Transportation Index on Wednesday, which had closed above its key moving averages and was potentially telling the rest of the market that this market leader may be getting to rally again: Fast forward a day and it is back below the 50 and 200-day EMAs. The longer it consolidates in the right shoulder of what looks like a head and shoulders pattern, the greater the possibility that this could break to the downside. So, it needs to find some traction soon, get back above those averages and the top of that shoulder, or it could get even uglier.
One back-handed positive yesterday was just how bad the action was. It's rare to see trading volume at 9 or 10 to 1 in favor of decliners, but yesterday that was the case. The NYSE saw close to 95% volume on the downside yesterday, compared to up. Not that the market will reverse right away, but a day or two of those numbers usually comes very close to a market low.
CNBC had another "Markets in Turmoil" special last night so we should be getting pretty close to another playable bounce.
We will get the April jobs report this morning (Friday) with estimates of a gain of 400,000 jobs, and an unemployment rate of 3.6%.
The S&P 500 (C-fund) took a dive after the Fed rally on Wednesday, retracing all of those gains, plus some. It's kind of surprising that it is actually still up modestly for the week, but once again a 2 - 3 day rally in a bearish market should have been sold. Now the chart sits near the recent lows and it is possibly carving out a short-term bottom like we saw in February and March. If that is the case, we would see some green in the indices today because anymore downside would be potentially making new lows.
DWCPF (S-fund / small caps) is in the same situation with some signs of similar bottoming action, but perhaps we are due for a capitulation-like sell off where investors give up and sell at any price, just to stop the pain. That usually precedes a rebound, but it could be ugly while it's happening.
The EFA (I-fund) was down big with the rest of the indices, and the bounce back in the dollar didn't help. There was a stealth gap filled yesterday. Its one of those gaps that don't show up as well on the charts, but the close on March 8th was near 67.40 and the next day's low was 69.15, so that was a form of a gap. It had been partially filled by a few down days, but only yesterday did it get fully filled.
BND (bonds / F-fund) resumed its down side after the fake out reversal on Wednesday. The downtrend continues and it's why we may need to see a break above resistance before considering any trade here.
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. Have a great weekend!
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.
