Stocks made a couple of attempts to rally on Friday, but with the long weekend ahead, the pessimism won out and we saw a late sell off push the indices lower into the close. The Dow lost another 233-points. Small caps are lagging again, and the Nasdaq continues to close in on its January low. Bonds were up as yields slipped on the - on again, off again Russia / Ukraine border invasion headlines.
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The S&P 500 (C-fund) tested the January closing low on Friday, and held, but it has now closed back below the 200-day EMA for two straight days and I would think one more could precede a test of the intraday January low. The PMO (price momentum oscillator) is rolling over below its moving average again.
The DWCPF (small caps / S-fund) is also on a collision course with its January lows after breaking below several areas of support. There is not a whole lot of support before that low. A double bottom low is certainly possible, but no guarantee, especially in the current environment.
The EFA (I-fund) held up better than the U.S. funds on Friday but it is back below the 200-day average and and it looks like a big bear flag is forming, and they do tend to break down. It could bounce off the bottom of that flag for a short relief bounce but I would prefer to be a seller of rallies here.
BND (Bonds / F-fund) remains in tough descending channel despite last week's late move higher. There are several opens gaps overhead that could get filled, especially if a war breaks out, but the trend remains down for bonds and the F-fund.
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. 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.
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Whether we are talking about rising inflation, the Fed's impending interest rate hikes because of the inflation, the potential for war in Eastern Europe, or the economic concerns that the conflict could bring, the charts have done a good job of telling the story.
The headlines regarding Russia Ukraine have been all over the place, and why that is the case, I don't know. Is it rumors to push the stock market around or actual uncertainty in the geopolitical world? Either way, it is bringing volatility to the global markets.
We may be nearing some extremes after the most recent push lower, but the chart of the S&P 500 is clearly in some trouble after breaking several layers of resistance. The orange moving average below was clear support when the S&P was trading above it, and it has become resistance and holding below it. Now the 200-day EMA has broken for a second time and it is a widely watched average that traders, investors, and programs watch to determine whether to be buyers or sellers. Being below it will be a negative for that group, but as we saw in January, the first push below it eventually produced an oversold extreme that was bought, but eventually failed. Now the question is whether we just need to see a test of that low, or if another leg down ensues. Being under that 200 day average suggests caution.
The 10-year Treasury Yield has pulled back as the threat of war intensifies. The economy may suffer if war does breakout and oil prices, which are already elevated to multi-year highs, may go off the charts again. Watch that 1.9% area on the 10-year T-note for a possible rebound off support.
The market is projecting a 19% chance of a rate hike of 0.50% in March. That is up from 6% from a month ago, but down from a 61% chance just last week because of the potential for war. That means the market is expecting a 0.25% hike in March, which may not help the inflationary picture as much, so the Fed will have to weigh whether intervening with inflation is more or less important than potentially slowing the economy, whch may be up against war already.
The Transportation Index is one of the market leaders and it too has fallen back below its 200-day average and a test of the January low look like good possibility. These charts are just not looking good, and the only bright side maybe that they could be getting so oversold that a relief rally may be due, especially if we get a test of the lows that does not break down.
This week we'll get the Consumer Confidence report, the Michigan Consumer Sentiment report, new GDP estimates, Personal Spending and Income reports, plus the weekly jobless numbers, so we have some catalysts as the 1st quarter earnings reports start to dwindle down.
The headlines regarding Russia Ukraine have been all over the place, and why that is the case, I don't know. Is it rumors to push the stock market around or actual uncertainty in the geopolitical world? Either way, it is bringing volatility to the global markets.
We may be nearing some extremes after the most recent push lower, but the chart of the S&P 500 is clearly in some trouble after breaking several layers of resistance. The orange moving average below was clear support when the S&P was trading above it, and it has become resistance and holding below it. Now the 200-day EMA has broken for a second time and it is a widely watched average that traders, investors, and programs watch to determine whether to be buyers or sellers. Being below it will be a negative for that group, but as we saw in January, the first push below it eventually produced an oversold extreme that was bought, but eventually failed. Now the question is whether we just need to see a test of that low, or if another leg down ensues. Being under that 200 day average suggests caution.
The 10-year Treasury Yield has pulled back as the threat of war intensifies. The economy may suffer if war does breakout and oil prices, which are already elevated to multi-year highs, may go off the charts again. Watch that 1.9% area on the 10-year T-note for a possible rebound off support.
The market is projecting a 19% chance of a rate hike of 0.50% in March. That is up from 6% from a month ago, but down from a 61% chance just last week because of the potential for war. That means the market is expecting a 0.25% hike in March, which may not help the inflationary picture as much, so the Fed will have to weigh whether intervening with inflation is more or less important than potentially slowing the economy, whch may be up against war already.
The Transportation Index is one of the market leaders and it too has fallen back below its 200-day average and a test of the January low look like good possibility. These charts are just not looking good, and the only bright side maybe that they could be getting so oversold that a relief rally may be due, especially if we get a test of the lows that does not break down.
This week we'll get the Consumer Confidence report, the Michigan Consumer Sentiment report, new GDP estimates, Personal Spending and Income reports, plus the weekly jobless numbers, so we have some catalysts as the 1st quarter earnings reports start to dwindle down.
The S&P 500 (C-fund) tested the January closing low on Friday, and held, but it has now closed back below the 200-day EMA for two straight days and I would think one more could precede a test of the intraday January low. The PMO (price momentum oscillator) is rolling over below its moving average again.
The DWCPF (small caps / S-fund) is also on a collision course with its January lows after breaking below several areas of support. There is not a whole lot of support before that low. A double bottom low is certainly possible, but no guarantee, especially in the current environment.
The EFA (I-fund) held up better than the U.S. funds on Friday but it is back below the 200-day average and and it looks like a big bear flag is forming, and they do tend to break down. It could bounce off the bottom of that flag for a short relief bounce but I would prefer to be a seller of rallies here.
BND (Bonds / F-fund) remains in tough descending channel despite last week's late move higher. There are several opens gaps overhead that could get filled, especially if a war breaks out, but the trend remains down for bonds and the F-fund.
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. 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.
