Stocks opened just slightly higher on Thursday but the bulls built momentum as the day went on and the indices closed at the highs of the day. The Dow gained 349-points, the Nasdaq lagged, and small caps led again. Bonds were up as yields and the dollar pulled back, but both held at tested support yesterday, which is interesting heading into today's PPI report.
[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]
After Tuesday's CPI sell off I wondered out loud if it was a bell ringing indicating a market top or just a shakeout, and it may still be debatable with the S&P not quite reaching Monday's highs, but certainly the small caps, the S-fund in this case which was down nearly 3% on Tuesday, have come roaring back to make a new multi-year high going back to March of 2022. So the broadening out of the market rally is trying fervently to manifest.
Today we get the PPI report before the opening bell, which is the producer price index, and it may not be the market mover that the CPI was, but if it reiterates the inflationary pressure of the CPI, we could get a repeat of Tuesday. Or, if it is inline with expectations or a little cool, perhaps it turns the CPI reaction into a one off event.
The internal strength yesterday was just what the bulls had been looking for as advancers clobbered the declining issues and total shares traded. New highs are also easily outpacing new lows.
I've been a fan of the S and I fund charts and so the broadening of the rally isn't too surprising to me, but I had become more cautious over the large caps that have been running away for months now and the chart is clearly stretched with the S&P now 520-points above its 200-day EMA. The 200-day EMA can be a magnet whether the S&P is above or below it. The average is moving up quickly, which is what you expect in a bull market, but the angle of incline in the index is outpacing the moving average and I don't know how long that much of a separation can last.
The S&P 500 could move sideways for a few weeks like the S and I-fund charts did, and that would let the moving average catch up without too much of a loss, or we could wake up on a day like last Tuesday with the S&P gapped down en route to a potential test of the 200-day EMA. Here's those consolidations in the S and I-funds.
The Russell 2000 small cap index (via the IWM ETF) has consolidated all year, and that's better than a straight line higher, but there is some longer term resistance coming into play now near 205. It's a nice looking set up, but it it has to breach this upcoming resistance, otherwise it fall back into the flag formation that it has been in since the start of the year.
The 10-year Treasury Yield and the dollar have pulled back sharply, basically giving back Tuesday's gains, but technically it was a clean test of the breakout area on the $TNX, and a gap fill on UUP after it hit a triple top. The PPI report could make or break these charts today.
It's an options expiration Friday and next week we'll get a shift to the historically more bearish half of February. Seasonality is not a primary indicator, but it is a breeze in one direction or the other. NVDA reports earnings after the bell on Wednesday of next week, so that could be interesting.
We have another holiday! According to tsp.gov, "Some financial markets will be closed on Monday, February 19, in observance of Washington’s Birthday (President’s Day). The Thrift Savings Plan will also be closed. Transactions that would have been processed Monday night (February 19) will be processed Tuesday night (February 20) at Tuesday's closing share prices."
So we'll see you on Tuesday!
The S&P 500 (C-fund) is back to the top of this main trading channel after rallying enough to fill in Tuesday's open gap. It bounced nicely off the 20-day EMA on Tuesday creating another shakeout day like we saw at the end of January and the middle of December. The resistance line of the trading channel and the 200-day EMA are rising so this can climb higher, but we saw on Tuesday what can happen at the first sign of trouble.
DWCPF (S-fund) has broken out to new highs. This has been a set up waiting to breakout and now, with it at new multi-year highs, the resistance is behind it, although if the S&P 500 falters I am still not sure if this can continue higher without it. There's now a small open gap down below 2000.
The EFA (I-fund) also broke out with the help of the dollar pulling back, but as I mentioned above, the dollar filled an open gap and is testing some rising support so we'll have to see if this breakout can hold if the dollar finds that support.
BND (bonds / F-fund) has been bouncing off the bottom of the flag and now I have two different bond charts telling two different stories. The $TNX chart up in the top section looks like it found support and wants to go higher, which would be bearish for BND below. But the bull flag is still working here which would suggest and eventual breakout to the upside, although it has filled an open gap and it could stall at yesterday's high. One of those two charts is going to have to give.
Thanks so much for reading! Have a great holiday 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
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.
[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]
After Tuesday's CPI sell off I wondered out loud if it was a bell ringing indicating a market top or just a shakeout, and it may still be debatable with the S&P not quite reaching Monday's highs, but certainly the small caps, the S-fund in this case which was down nearly 3% on Tuesday, have come roaring back to make a new multi-year high going back to March of 2022. So the broadening out of the market rally is trying fervently to manifest.
Today we get the PPI report before the opening bell, which is the producer price index, and it may not be the market mover that the CPI was, but if it reiterates the inflationary pressure of the CPI, we could get a repeat of Tuesday. Or, if it is inline with expectations or a little cool, perhaps it turns the CPI reaction into a one off event.
The internal strength yesterday was just what the bulls had been looking for as advancers clobbered the declining issues and total shares traded. New highs are also easily outpacing new lows.
I've been a fan of the S and I fund charts and so the broadening of the rally isn't too surprising to me, but I had become more cautious over the large caps that have been running away for months now and the chart is clearly stretched with the S&P now 520-points above its 200-day EMA. The 200-day EMA can be a magnet whether the S&P is above or below it. The average is moving up quickly, which is what you expect in a bull market, but the angle of incline in the index is outpacing the moving average and I don't know how long that much of a separation can last.
The S&P 500 could move sideways for a few weeks like the S and I-fund charts did, and that would let the moving average catch up without too much of a loss, or we could wake up on a day like last Tuesday with the S&P gapped down en route to a potential test of the 200-day EMA. Here's those consolidations in the S and I-funds.
The Russell 2000 small cap index (via the IWM ETF) has consolidated all year, and that's better than a straight line higher, but there is some longer term resistance coming into play now near 205. It's a nice looking set up, but it it has to breach this upcoming resistance, otherwise it fall back into the flag formation that it has been in since the start of the year.
The 10-year Treasury Yield and the dollar have pulled back sharply, basically giving back Tuesday's gains, but technically it was a clean test of the breakout area on the $TNX, and a gap fill on UUP after it hit a triple top. The PPI report could make or break these charts today.
It's an options expiration Friday and next week we'll get a shift to the historically more bearish half of February. Seasonality is not a primary indicator, but it is a breeze in one direction or the other. NVDA reports earnings after the bell on Wednesday of next week, so that could be interesting.
We have another holiday! According to tsp.gov, "Some financial markets will be closed on Monday, February 19, in observance of Washington’s Birthday (President’s Day). The Thrift Savings Plan will also be closed. Transactions that would have been processed Monday night (February 19) will be processed Tuesday night (February 20) at Tuesday's closing share prices."
So we'll see you on Tuesday!
The S&P 500 (C-fund) is back to the top of this main trading channel after rallying enough to fill in Tuesday's open gap. It bounced nicely off the 20-day EMA on Tuesday creating another shakeout day like we saw at the end of January and the middle of December. The resistance line of the trading channel and the 200-day EMA are rising so this can climb higher, but we saw on Tuesday what can happen at the first sign of trouble.
DWCPF (S-fund) has broken out to new highs. This has been a set up waiting to breakout and now, with it at new multi-year highs, the resistance is behind it, although if the S&P 500 falters I am still not sure if this can continue higher without it. There's now a small open gap down below 2000.
The EFA (I-fund) also broke out with the help of the dollar pulling back, but as I mentioned above, the dollar filled an open gap and is testing some rising support so we'll have to see if this breakout can hold if the dollar finds that support.
BND (bonds / F-fund) has been bouncing off the bottom of the flag and now I have two different bond charts telling two different stories. The $TNX chart up in the top section looks like it found support and wants to go higher, which would be bearish for BND below. But the bull flag is still working here which would suggest and eventual breakout to the upside, although it has filled an open gap and it could stall at yesterday's high. One of those two charts is going to have to give.
Thanks so much for reading! Have a great holiday 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
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.
