Stocks ended a choppy week of trading with some flat to mixed results on Thursday. We saw small gains in the Dow and S&P 500 (C-fund) while small caps led and the I-fund was down on another rally in the dollar. The F-fund was down as yields moved higher. We saw some good returns in the stock market in March making it 5-straight months with a gain for the S&P 500. That's actually a good sign.
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We did see some late selling on Thursday, which has been occurring more frequently, but it was the end of the quarter and heading into a 3-day week (for the stock and bond markets) so a little profit taking doesn't sound unreasonable as we headed into Friday's PCE Prices inflationary report. That report came out fairly close to estimates so I don't see much of a reaction coming, but the charts did create some bearish short-term negative reversals, so we'll see how the market deals with that. The futures did open higher on Sunday evening.
It was the fifth straight positive month for the S&P 500, which has happened 118 times since 1922, and the results going forward were mostly bullish. Here is some data from sentimentrader.com showing what happened after prior 5-month rallies.
Chart provided courtesy of www.sentimentrader.com
I'm sure every situation is different regarding the economy, presidential cycles, Fed policies, etc., but overall it looks quite favorable going forward.
Speaking of presidential cycles, the average and median return for the S&P 500 during a presidential election year is +9.8% and +11.6% respectively. Through March the S&P 500 is already up 10.8% in 2024, so while stocks may (or may not) continue to rise this year, we probably won't see it moving at the same pace for the next 9 months.
Right now the market has priced in a 100% chance of an interest rate cut by the end of the year, and actually by the September meeting. When that starts is not as certain. There is about a 63% chance of a cut by the June meeting and an 87% chance by the July meeting.
As for the Fed's balance sheet, it has been steadily declining so quantitative tightening is still going on. It hasn't hurt the stock market yet, but...
... it is bolstering the dollar and that is likely part of the reason why the I-fund is lagging the C (S&P 500) and S funds (small caps) so far this year. And the S fund is lagging the C-fund, most likely due to yields moving up so far in 2024, despite knowing the Fed is going to cut rates.
That's because yields took a swan dive after the first hints from the Fed back last fall that they thought inflation was under control. This slow steady rally actually looks like a possible bear flag and that could mean an eventual breakdown, but the trend is currently up.
One more time on the April seasonality chart which has a convincingly bullish bias during the first half of the month.
Chart provided courtesy of www.sentimentrader.com
The March TSP Talk AutoTracker winners have been announced and notified via private message in the forum. Great job! More info.
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The S&P 500 (C-fund) made a new high with that modest gain on Thursday. It closed off the highs but the +0.11% was enough to make it a new closing high as well. I didn't have to draw anything on this chart since it is fairly self evident what's going on here. Charts that start in the bottom left and end in the top right are in bull markets, and right now the support is the rising 15-day moving average - and for whatever reason, that is working. At some point it will need to take a break and it will eventually test the 50-day EMA, but we will see the 15-day EMA break before that happens so hopefully we will get a head's up warning before any major pullback.
DWCPF (S-fund) also made a new high for the year but it created a negative reversal day leaving the door open for a possible slow start to the week ,but again that would buck the bullish seasonal trend for first week of April. There's a very small open gap between Wednesday's high and Thursday's low.
EFA (I-fund) was down on Thursday with the dollar up 0.28%, which pretty much made the difference. The 11-day moving average seems to have some meaning on this chart. And there is a cup and handle formation on the brink of a breakout, if that 11-day average can continue to hold.
BND (Bonds / F-fund) was down as yields moved higher on Thursday, and the spinning top formation is a sign of indecision from investors so it could be a short-term turning point if that old resistance line can't hold as support.
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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We did see some late selling on Thursday, which has been occurring more frequently, but it was the end of the quarter and heading into a 3-day week (for the stock and bond markets) so a little profit taking doesn't sound unreasonable as we headed into Friday's PCE Prices inflationary report. That report came out fairly close to estimates so I don't see much of a reaction coming, but the charts did create some bearish short-term negative reversals, so we'll see how the market deals with that. The futures did open higher on Sunday evening.
It was the fifth straight positive month for the S&P 500, which has happened 118 times since 1922, and the results going forward were mostly bullish. Here is some data from sentimentrader.com showing what happened after prior 5-month rallies.
Chart provided courtesy of www.sentimentrader.com
I'm sure every situation is different regarding the economy, presidential cycles, Fed policies, etc., but overall it looks quite favorable going forward.
Speaking of presidential cycles, the average and median return for the S&P 500 during a presidential election year is +9.8% and +11.6% respectively. Through March the S&P 500 is already up 10.8% in 2024, so while stocks may (or may not) continue to rise this year, we probably won't see it moving at the same pace for the next 9 months.
Right now the market has priced in a 100% chance of an interest rate cut by the end of the year, and actually by the September meeting. When that starts is not as certain. There is about a 63% chance of a cut by the June meeting and an 87% chance by the July meeting.
As for the Fed's balance sheet, it has been steadily declining so quantitative tightening is still going on. It hasn't hurt the stock market yet, but...
... it is bolstering the dollar and that is likely part of the reason why the I-fund is lagging the C (S&P 500) and S funds (small caps) so far this year. And the S fund is lagging the C-fund, most likely due to yields moving up so far in 2024, despite knowing the Fed is going to cut rates.
That's because yields took a swan dive after the first hints from the Fed back last fall that they thought inflation was under control. This slow steady rally actually looks like a possible bear flag and that could mean an eventual breakdown, but the trend is currently up.
One more time on the April seasonality chart which has a convincingly bullish bias during the first half of the month.
Chart provided courtesy of www.sentimentrader.com
The March TSP Talk AutoTracker winners have been announced and notified via private message in the forum. Great job! More info.
Do you know your returns? We'll track them for you. It's a great way to stay on top of your account. And it's free!
The S&P 500 (C-fund) made a new high with that modest gain on Thursday. It closed off the highs but the +0.11% was enough to make it a new closing high as well. I didn't have to draw anything on this chart since it is fairly self evident what's going on here. Charts that start in the bottom left and end in the top right are in bull markets, and right now the support is the rising 15-day moving average - and for whatever reason, that is working. At some point it will need to take a break and it will eventually test the 50-day EMA, but we will see the 15-day EMA break before that happens so hopefully we will get a head's up warning before any major pullback.
DWCPF (S-fund) also made a new high for the year but it created a negative reversal day leaving the door open for a possible slow start to the week ,but again that would buck the bullish seasonal trend for first week of April. There's a very small open gap between Wednesday's high and Thursday's low.
EFA (I-fund) was down on Thursday with the dollar up 0.28%, which pretty much made the difference. The 11-day moving average seems to have some meaning on this chart. And there is a cup and handle formation on the brink of a breakout, if that 11-day average can continue to hold.
BND (Bonds / F-fund) was down as yields moved higher on Thursday, and the spinning top formation is a sign of indecision from investors so it could be a short-term turning point if that old resistance line can't hold as support.
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.
