The Fed's sentiment seems to be changing as they take a more hawkish tone with recent comments and per the recent FOMC meeting minutes, and the stock market reacted as we might expect since the Federal Reserve and their actions have been such major factor in our "free" markets. The Dow lost a modest 145-points with more significant percent losses in the broader indices. Oil fell sharply and below $100 a barrel, and 10-year bond yields move up to new highs.
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The more hawkish commentary from the Fed has the market pricing in an 80% chance of a 0.50% rate hike at the May 4 meeting.
Source: [url]https://www.cmegroup.com
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They are also pricing in a 58% of another 0.50% hike at the June meeting, so get your seat belts buckled. We're entering a different market environment than we have seen in a long, long time.
I have the TSP fund charts down below but here's a quick look at the S&P 500. One of our Premium members pointed out to me the possible inverted head and shoulders pattern being formed right now. If the low of the left shoulder created in February can hold here in the right shoulder, and we just tested it yesterday, there is a chance that it could be the low of this pullback. I don't know if that will be the case and officially we won't know until either that support gets taken out, or we see a push back up to the recent highs again.
First quarter earnings season is getting closer, and that's usually a more bullish time for stocks, but the major market movers don't report until later in the month. We'll find out how many companies start to point toward cost issues because of higher inflation and fuel prices, making it possible that we get some pre-earnings warnings that may set up some sell the rumor, by the news reactions.
The S&P 500 (C-fund) gapped lower on Wednesday, and that gap remains open. The chart came down, broke back below that orange moving average, but it tested and held at the 50-day EMA, closing back above it so there were some interest buyers in that area. That could be the low for this decline, but otherwise I have drawn in other potential pullback targets. The immediate technical concern may be whether it can get back over that pesky orange moving average.
DWCPF (S-fund / small caps) was hit twice as hard as the large caps, as the threat of higher interest rates tends to send the more volatile indices down more sharply. There's been some technical damage done to the chart as it fell below some key moving averages this week. The 1900 area looks like potential support, but we can't forget about that open gap near 1840.
The EFA (I-fund) broke down as well and may be heading for that open gap near 70. The dollar ended the day up again, making it 5 days in a row, and that is not what the I-fund wants to see.
BND (Bonds / F-fund) was down again and there really isn't much to say here except the trend is your friend, but the trend is down here.
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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The Fed Meeting minutes were released yesterday and Fed officials reached consensus that they would begin reducing the central bank balance sheet by $95 billion a month, likely beginning in May.
So this is a market that no longer has the Fed standing behind it ready to catch every wobble like we have seen since probably the financial crisis, and more recently since the Covid recovery. And the last wave of post-Coved stimulus seems to have been the last straw that pushed the economy into an inflationary environment.
There is probably a large population of investors who have never seen a market without stimulus, 0% interest rates, and bond buying programs to prop up the economy and the stock market. They may be in for a rude awakening. But this is why I created TSP Talk many years ago - before the financial crisis - and our slogan back then became, "Friends Don't Let Friend Buy and Hold."
Thanks to the Fed, over the last decade, buying and holding actually worked well making a mockery of our slogan, but finally it seems, the buy and holder may finally get a dose of realty, and market timers may finally have a better time of it in the coming years. We'll see. The Fed may have more tricks up their sleeve if things get worse.
The yield on the 10-year Treasury shot up again, moving above recent resistance and closing above 2.60% for the first time in many years. That is above the 2-year T-note yield which closed at 2.49%, so again, the 2/10 yield curve is not inverted at this time.
So this is a market that no longer has the Fed standing behind it ready to catch every wobble like we have seen since probably the financial crisis, and more recently since the Covid recovery. And the last wave of post-Coved stimulus seems to have been the last straw that pushed the economy into an inflationary environment.
There is probably a large population of investors who have never seen a market without stimulus, 0% interest rates, and bond buying programs to prop up the economy and the stock market. They may be in for a rude awakening. But this is why I created TSP Talk many years ago - before the financial crisis - and our slogan back then became, "Friends Don't Let Friend Buy and Hold."
Thanks to the Fed, over the last decade, buying and holding actually worked well making a mockery of our slogan, but finally it seems, the buy and holder may finally get a dose of realty, and market timers may finally have a better time of it in the coming years. We'll see. The Fed may have more tricks up their sleeve if things get worse.
The yield on the 10-year Treasury shot up again, moving above recent resistance and closing above 2.60% for the first time in many years. That is above the 2-year T-note yield which closed at 2.49%, so again, the 2/10 yield curve is not inverted at this time.
The more hawkish commentary from the Fed has the market pricing in an 80% chance of a 0.50% rate hike at the May 4 meeting.
Source: [url]https://www.cmegroup.com
[/URL]
They are also pricing in a 58% of another 0.50% hike at the June meeting, so get your seat belts buckled. We're entering a different market environment than we have seen in a long, long time.
I have the TSP fund charts down below but here's a quick look at the S&P 500. One of our Premium members pointed out to me the possible inverted head and shoulders pattern being formed right now. If the low of the left shoulder created in February can hold here in the right shoulder, and we just tested it yesterday, there is a chance that it could be the low of this pullback. I don't know if that will be the case and officially we won't know until either that support gets taken out, or we see a push back up to the recent highs again.
First quarter earnings season is getting closer, and that's usually a more bullish time for stocks, but the major market movers don't report until later in the month. We'll find out how many companies start to point toward cost issues because of higher inflation and fuel prices, making it possible that we get some pre-earnings warnings that may set up some sell the rumor, by the news reactions.
The S&P 500 (C-fund) gapped lower on Wednesday, and that gap remains open. The chart came down, broke back below that orange moving average, but it tested and held at the 50-day EMA, closing back above it so there were some interest buyers in that area. That could be the low for this decline, but otherwise I have drawn in other potential pullback targets. The immediate technical concern may be whether it can get back over that pesky orange moving average.
DWCPF (S-fund / small caps) was hit twice as hard as the large caps, as the threat of higher interest rates tends to send the more volatile indices down more sharply. There's been some technical damage done to the chart as it fell below some key moving averages this week. The 1900 area looks like potential support, but we can't forget about that open gap near 1840.
The EFA (I-fund) broke down as well and may be heading for that open gap near 70. The dollar ended the day up again, making it 5 days in a row, and that is not what the I-fund wants to see.
BND (Bonds / F-fund) was down again and there really isn't much to say here except the trend is your friend, but the trend is down here.
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.
