On Monday stocks countered Friday's late sell off with a late rally as the bears seemed to be hibernating yesterday in front of this morning's CPI report, which comes out an hour before the opening bell. The Dow gained 529-points and we saw 1% gains or more in many indices, although for the first time in a while the I-fund lagged. The Dow Transports gains 3% on the day. Yields were up sending bonds and the F-fund down.
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The Consumer Price Index report comes out this morning before the opening bell and it should be a market mover. Judging by yesterday's rally we either saw a lot of short covering in front of the report, or a lot of optimistic investors jumping in stocks anticipating a report lower than estimates, meaning something that shows that inflation is cooling.
Of course the more meaningful day will be Wednesday when the Fed makes a decision on interest rates, and I suppose the question is whether they have made up their minds already before that CPI comes out, if they have seen the CPI data already, or if they will make a decision taking the new CPI data into consideration?
Yesterday I was saying that the charts look a little broken but nothing like a nice rally to improve things, however yesterday's action could be one of the fake out moves to get us dumb money leaning the wrong way. I don't know, but I like a good conspiracy.
It's not like they haven't done that to us before.
The bond market and the dollar are in interesting positions leading up to these next two important days for the stocks market. The yield on the 10-year Treasury Note broke above some resistance yesterday after a push higher (which sent bond prices lower) and there is an open gap near 3.7% that need filled, which is right about where this would test the 50-day EMA. I see three possible scenarios tomorrow:
- A gap up higher above that open gap, which seems to have been an important area for this yield for months.
- A sell off in yields that doesn't make it to the gap|
- A gap fill that acts as resistance causing a flip back over
The dollar has been pinned to the 200-day moving average all month after being in declining mode for weeks. Does this break down today, or bounce off the average? The difference could make or break the stock market as stocks have enjoyed the weakness in the dollar during the bear market rally.
A close look at the S&P 500 chart (C-fund) shows the mini-bear flag that has been forming. They typically break down but that 50-day EMA (purple) has been holding it up as support for a week now. A break down could finally fill in that open gap from the prior CPI report on November 10th which, depending how you look at it, could be as low as 3750, or 3820 if you go by the Nov. 9 high. There's also resistance above at the 200-day averages.
One interesting note in that chart is that only yesterday did the S&P 500 close back above where it was after the prior CPI triggered rally on November 10th. It was below that area after Friday's close. This is a VERY interest set up for something big.
The Volatility Index (VIX) shot up almost 10% yesterday. A move up on a Monday isn't unusual but it is unusual to see this move up of this size on a day where the Dow gained over 500-points. It means investors are getting ready for another big move in stocks. The fact that it touched the 200-day EMA yesterday means it could go down from that resistance, in which case stocks would likely be rallying, or it could gap above it and put the market on alert for some troubling downside like we saw in September.
I see CPI estimates in the 0.3% to 0.4% area, with year over year estimates of 7.3%. Obviously anything above or below that will have a huge impact on the market. October's year over year gain was 7.7%.
Admin Note: This is a preliminary reminder to login to the TSP Talk AutoTracker if you haven't for a while. Accounts that have been idle for too long won't rollover into the New Year. I'll remind everyone again during the week before New Year's but in case you won't be around, here is your reminder. If you are not already on the AutoTracker, this is a good time to start so that we track your full year in 2023. It's free. More info on creating a new account: AutoTracler - How to get started
I posted the S&P 500 (C-fund) above but here's the longer term version showing the narrowing levels of support and resistance. The bear flag, and the open gap. Notice how light the trading volume was yesterday so it wasn't really institutional investors pounding the table like they did on November 30th when the Fed supposedly pivoted.
The DWCPF (S-fund) and the I-fund were up yesterday but today is going to set the tone rather than trying to figure out what's coming next. The question will be whether to jump on the side of the direction that the market moves today, or fade it and try to make money with a shorter term trade.
BND (bonds / F-fund) fell down to 73 where we expected to see support. The next area of support, if this does continue lower, would be near 72, and then 71. The CPI report will most certainly move this but at this point it is a coin toss, and a gamble, whether or not that channel breaks down.
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 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.
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[TD="width: 338, align: center"] Daily TSP Funds Return
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The Consumer Price Index report comes out this morning before the opening bell and it should be a market mover. Judging by yesterday's rally we either saw a lot of short covering in front of the report, or a lot of optimistic investors jumping in stocks anticipating a report lower than estimates, meaning something that shows that inflation is cooling.
Of course the more meaningful day will be Wednesday when the Fed makes a decision on interest rates, and I suppose the question is whether they have made up their minds already before that CPI comes out, if they have seen the CPI data already, or if they will make a decision taking the new CPI data into consideration?
Yesterday I was saying that the charts look a little broken but nothing like a nice rally to improve things, however yesterday's action could be one of the fake out moves to get us dumb money leaning the wrong way. I don't know, but I like a good conspiracy.
It's not like they haven't done that to us before.The bond market and the dollar are in interesting positions leading up to these next two important days for the stocks market. The yield on the 10-year Treasury Note broke above some resistance yesterday after a push higher (which sent bond prices lower) and there is an open gap near 3.7% that need filled, which is right about where this would test the 50-day EMA. I see three possible scenarios tomorrow:
- A gap up higher above that open gap, which seems to have been an important area for this yield for months.
- A sell off in yields that doesn't make it to the gap|
- A gap fill that acts as resistance causing a flip back over
The dollar has been pinned to the 200-day moving average all month after being in declining mode for weeks. Does this break down today, or bounce off the average? The difference could make or break the stock market as stocks have enjoyed the weakness in the dollar during the bear market rally.
A close look at the S&P 500 chart (C-fund) shows the mini-bear flag that has been forming. They typically break down but that 50-day EMA (purple) has been holding it up as support for a week now. A break down could finally fill in that open gap from the prior CPI report on November 10th which, depending how you look at it, could be as low as 3750, or 3820 if you go by the Nov. 9 high. There's also resistance above at the 200-day averages.
One interesting note in that chart is that only yesterday did the S&P 500 close back above where it was after the prior CPI triggered rally on November 10th. It was below that area after Friday's close. This is a VERY interest set up for something big.
The Volatility Index (VIX) shot up almost 10% yesterday. A move up on a Monday isn't unusual but it is unusual to see this move up of this size on a day where the Dow gained over 500-points. It means investors are getting ready for another big move in stocks. The fact that it touched the 200-day EMA yesterday means it could go down from that resistance, in which case stocks would likely be rallying, or it could gap above it and put the market on alert for some troubling downside like we saw in September.
I see CPI estimates in the 0.3% to 0.4% area, with year over year estimates of 7.3%. Obviously anything above or below that will have a huge impact on the market. October's year over year gain was 7.7%.
Admin Note: This is a preliminary reminder to login to the TSP Talk AutoTracker if you haven't for a while. Accounts that have been idle for too long won't rollover into the New Year. I'll remind everyone again during the week before New Year's but in case you won't be around, here is your reminder. If you are not already on the AutoTracker, this is a good time to start so that we track your full year in 2023. It's free. More info on creating a new account: AutoTracler - How to get started
I posted the S&P 500 (C-fund) above but here's the longer term version showing the narrowing levels of support and resistance. The bear flag, and the open gap. Notice how light the trading volume was yesterday so it wasn't really institutional investors pounding the table like they did on November 30th when the Fed supposedly pivoted.
The DWCPF (S-fund) and the I-fund were up yesterday but today is going to set the tone rather than trying to figure out what's coming next. The question will be whether to jump on the side of the direction that the market moves today, or fade it and try to make money with a shorter term trade.
BND (bonds / F-fund) fell down to 73 where we expected to see support. The next area of support, if this does continue lower, would be near 72, and then 71. The CPI report will most certainly move this but at this point it is a coin toss, and a gamble, whether or not that channel breaks down.
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 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.
