The release of the Fed Minutes isn't usually a big market mover, maybe a midday bump, but yesterday the July Minutes gave investors some concern over interest rates again as the Fed continues its hawkish rhetoric and have not ruled out additional hikes. The market indices, which were crawling into positive territory before the release of the Minutes, quickly fell to the lows of the day, and once again we see investors selling first and asking questions later.
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I have a lot on my mind regarding the market but I will try not to go into the weeds too much. All I know is, after missing all of the losses during the 2022 bear market, this 2023 market has has had me zigging while stocks were zagging, and zagging while stocks were zigging.
During much of the spring rally I was overly bearish and pointing out all of the concerns we see daily, while stocks climbed without regard to any of those factors. Then, not long ago when we got a pullback that looked buyable and I was having a case of FOMO, I bought in, and now we are seeing the evidence of all the concerns I had during spring. The market can be irrational at times, but it is never wrong. Only we are.
So now what? The charts are trying to tell us that the market is in trouble, but is it, or is this pullback another fake out to get the bulls to give up and sell before another pop higher?
I don't have the answer but let's look at some charts from earlier this year. I'm not sure exactly what was happening that day back in May when the S&P 500 fell below the rising red dashed support line to give us a technical warning, but it then successfully tested the 50-day EMA, something it is doing again this week. Then...
... the breakdown from the support line turned out to be a fake out and the 50-day EMA held. That made some sense, and the rally resumed.
Yesterday's decline, and remember it was triggered by an emotional release of Fed data, pushed the S&P 500 below its rising support and the 50-day EMA. Both were holding before the Fed Minutes were released. So, do stocks shake off the breakdown and push back above the support line and 50-day EMA like in May, or is this the warning that something worse is coming?
Again, I wish I knew. A lot of the concerns are coming out now with yields potentially going higher giving investors a good alternative to stocks, China's economy is slowing down, and we supposedly still have the potential recession with the yield curve still deeply inverted.
There's more, but what's more interesting is perhaps the bullish developments that we are now seeing, which can also push yields higher, and that is economic growth.
To name a few:
The monthly Retail Sales for July came in much better than expected yesterday with a gain of 0.7% vs. the 0.4% estimates.
Industrial Production also easily beat estimate being up 1.0% vs. a 0.3% estimate.
Housing starts also beat estimates and was up 54,000 over the prior month.
The Atlanta Fed revised their 3rd quarter GDP estimates to +5.8%. This is huge if you consider a recession is defined loosely as two consecutive quarters of negative GDP. 5.8% is strong growth.
This doesn't match the "Blue Chip" consensus estimates, which is still below 2%, but it is intriguing. I'll post more about this down below.
So yields are not only moving up on possible sticky inflation, according to the Fed, but also on a potentially higher growth rate than has been expected.
The Yield on the 10-year Treasury popped to new recent high, but as I mentioned yesterday, it is nearing some resistance than could see it pause or pullback soon. At 4.3%, it feels high because we are all used to much lower yields during the COVID recovery when the 10-year yield went down to 0.50%. 4.0% and 5.0% is actually "normal", but it's relative and changes mean adjusting elsewhere in investments. For example, if a retired person wants to lock in a 4.3% return for 10 years, they can do so, but may have to sell some stocks to buy that bond.
The dollar is also seeing a lot of strength but it is dealing with some major resistance, at least in the short-term.
Higher yields and a stronger dollar can weigh on the stock market, as we have seen recently.
Wal-mart reports today and there are some lofty expectations. Meanwhile it is priced at one of its highest valuations per earnings in its history, so it has something to prove to assure investors. This could be a market mover if it misses or beats earnings estimates with any conviction, or surprises with good or bad future guidance.
I posted the S&P 500 (C-fund) chart above, and the other TSP fund chart are in equally precarious positions, so I will use this space for a few other charts showing the Atlanta Fed's GDP forecast.
Source: https://www.atlantafed.org/-/media/documents/cqer/researchcq/gdpnow/RealGDPTrackingSlides.pdf
Blue Chip Consensus vs. the Atlanta Fed's GDP estimates.
Here is a the climbing estimate of GDP based on the better than expected data coming in:
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.
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"]
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[TD="width: 338, align: center"] Daily TSP Funds Return
[TR]
[TD="align: right"][/TD]
[/TR]
[/TABLE]
[/TD]
[/TR]
[/TABLE]
I have a lot on my mind regarding the market but I will try not to go into the weeds too much. All I know is, after missing all of the losses during the 2022 bear market, this 2023 market has has had me zigging while stocks were zagging, and zagging while stocks were zigging.
During much of the spring rally I was overly bearish and pointing out all of the concerns we see daily, while stocks climbed without regard to any of those factors. Then, not long ago when we got a pullback that looked buyable and I was having a case of FOMO, I bought in, and now we are seeing the evidence of all the concerns I had during spring. The market can be irrational at times, but it is never wrong. Only we are.
So now what? The charts are trying to tell us that the market is in trouble, but is it, or is this pullback another fake out to get the bulls to give up and sell before another pop higher?
I don't have the answer but let's look at some charts from earlier this year. I'm not sure exactly what was happening that day back in May when the S&P 500 fell below the rising red dashed support line to give us a technical warning, but it then successfully tested the 50-day EMA, something it is doing again this week. Then...
... the breakdown from the support line turned out to be a fake out and the 50-day EMA held. That made some sense, and the rally resumed.
Yesterday's decline, and remember it was triggered by an emotional release of Fed data, pushed the S&P 500 below its rising support and the 50-day EMA. Both were holding before the Fed Minutes were released. So, do stocks shake off the breakdown and push back above the support line and 50-day EMA like in May, or is this the warning that something worse is coming?
Again, I wish I knew. A lot of the concerns are coming out now with yields potentially going higher giving investors a good alternative to stocks, China's economy is slowing down, and we supposedly still have the potential recession with the yield curve still deeply inverted.
There's more, but what's more interesting is perhaps the bullish developments that we are now seeing, which can also push yields higher, and that is economic growth.
To name a few:
The monthly Retail Sales for July came in much better than expected yesterday with a gain of 0.7% vs. the 0.4% estimates.
Industrial Production also easily beat estimate being up 1.0% vs. a 0.3% estimate.
Housing starts also beat estimates and was up 54,000 over the prior month.
The Atlanta Fed revised their 3rd quarter GDP estimates to +5.8%. This is huge if you consider a recession is defined loosely as two consecutive quarters of negative GDP. 5.8% is strong growth.
This doesn't match the "Blue Chip" consensus estimates, which is still below 2%, but it is intriguing. I'll post more about this down below.
So yields are not only moving up on possible sticky inflation, according to the Fed, but also on a potentially higher growth rate than has been expected.
The Yield on the 10-year Treasury popped to new recent high, but as I mentioned yesterday, it is nearing some resistance than could see it pause or pullback soon. At 4.3%, it feels high because we are all used to much lower yields during the COVID recovery when the 10-year yield went down to 0.50%. 4.0% and 5.0% is actually "normal", but it's relative and changes mean adjusting elsewhere in investments. For example, if a retired person wants to lock in a 4.3% return for 10 years, they can do so, but may have to sell some stocks to buy that bond.
The dollar is also seeing a lot of strength but it is dealing with some major resistance, at least in the short-term.
Higher yields and a stronger dollar can weigh on the stock market, as we have seen recently.
Wal-mart reports today and there are some lofty expectations. Meanwhile it is priced at one of its highest valuations per earnings in its history, so it has something to prove to assure investors. This could be a market mover if it misses or beats earnings estimates with any conviction, or surprises with good or bad future guidance.
I posted the S&P 500 (C-fund) chart above, and the other TSP fund chart are in equally precarious positions, so I will use this space for a few other charts showing the Atlanta Fed's GDP forecast.
Source: https://www.atlantafed.org/-/media/documents/cqer/researchcq/gdpnow/RealGDPTrackingSlides.pdf
Blue Chip Consensus vs. the Atlanta Fed's GDP estimates.
Here is a the climbing estimate of GDP based on the better than expected data coming in:
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.
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.
