Stocks turned a sluggish morning into a positive close before the mid-week holiday on Tuesday. Small caps lagged again despite a sharp drop in Treasury Yields, and that drop helped bonds and the F-fund to a nice gain as well. The I-fund also came back to life recently as the dollar has pulled back the last couple of days, and it looks like an interesting pivot point.
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It was an interesting day on Tuesday with all three of the major indices, as well as the small caps, posting gains, while at the same time 6 of the Magnificent 7 stocks were down on the day. The market breadth was split with the NYSE being quite positive and the Nasdaq negative, but share volume was positive on both, which again is interesting since many of the largest, and most heavily traded stocks, were down.
The NYSE saw more new highs on the day than up, which hasn't always been the case recently. So is something changing?
Well, if you believe in some of the odd tendencies of the market, maybe. There is a tendency to see stocks reverse from the larger trend before a holiday, then reverse back afterward. However, that tendency works better during long three day holiday weekends and holidays that are celebrated globally. Juneteenth is our own thing.
But there is also a Summer Solstice reversal tendency, so that will be put to the test today and tomorrow as the official solstice is Thursday night. For whatever reason, there is a tendency for prices to change direction after this event.
But what does that mean for US stocks when the charts are not all moving in the same direction?
If the S&P 500 was going to change direction it would appear to be a bearish thing, since the trend is convincing up.
Meanwhile the small caps and the S-fund peaked back in late March, made a lower high in May, and they've been trending lower for the last month. If that changes trend the S-fund would be golden. It did break above the descending channel of Tuesday, so was that a pre-holiday reversal that will move back down after the holiday, or are we finally looking at a change in direction after a false breakout earlier this month?
Treasury Yields are trending lower and I don't think the stock or bond market would like the idea of a reversal here. But once again the weakness in yields is not helping the small caps all that much as it once did earlier in the year.
The dollar was down for a second day helping the I-fund to a nice day on Tuesday. The 2-day pullback nearly filled an open gap, and that may be all that this pullback wants to do, but if it can retrace that large bullish candle, there may be more downside left in the pullback, which would help the I-fund, and to a lesser degree, the US stocks as well.
It also happens to be a quadruple witching expiration week and that means tomorrow will likely be a high volume and perhaps volatile day, depending where the bulk of the strike prices on some of the major stock indices options and futures contracts are. There's a lot of pushing and pulling going on on these days.
The S&P 500 (C-fund) is still climbing that wall of worry as more and more people expect a pullback, and you know how that goes -- the more people expecting something, the less likely it will happen. But when it does happen, they usually take out the dip buyers with them just to spread the pain to those late to the party. There's an open gap near 5375 that may need some attention.
DWCPF (S-fund) did rally on Tuesday, but nothing to write home about as it only filled a small open gap in the process. It did move back above the descending resistance line again, and that's something, but it has to hold for more than a couple of days. That old gap from early May is still impacting this chart.
The EFA (I-fund) had a big day on Tuesday leading the TSP funds on the upside, and that was with the help of a weak dollar. The dollar is at the top of a range after a failed breakout, so perhaps it needs to test the lower end again? Maybe, but once that gap is filled on the UUP chart, it could find support - although retracing that large bullish candlestick down toward 28.6 is also possible.
BND (bonds / F-fund) rallied again as yields have continued to trend lower since one of the inflation reports a while back. This remains in a bullish channel, but it's pressing near the top of that channel and there is a lot of room below if it decides to do some backing and filling of some of those open gaps.
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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It was an interesting day on Tuesday with all three of the major indices, as well as the small caps, posting gains, while at the same time 6 of the Magnificent 7 stocks were down on the day. The market breadth was split with the NYSE being quite positive and the Nasdaq negative, but share volume was positive on both, which again is interesting since many of the largest, and most heavily traded stocks, were down.
The NYSE saw more new highs on the day than up, which hasn't always been the case recently. So is something changing?
Well, if you believe in some of the odd tendencies of the market, maybe. There is a tendency to see stocks reverse from the larger trend before a holiday, then reverse back afterward. However, that tendency works better during long three day holiday weekends and holidays that are celebrated globally. Juneteenth is our own thing.
But there is also a Summer Solstice reversal tendency, so that will be put to the test today and tomorrow as the official solstice is Thursday night. For whatever reason, there is a tendency for prices to change direction after this event.
But what does that mean for US stocks when the charts are not all moving in the same direction?
If the S&P 500 was going to change direction it would appear to be a bearish thing, since the trend is convincing up.
Meanwhile the small caps and the S-fund peaked back in late March, made a lower high in May, and they've been trending lower for the last month. If that changes trend the S-fund would be golden. It did break above the descending channel of Tuesday, so was that a pre-holiday reversal that will move back down after the holiday, or are we finally looking at a change in direction after a false breakout earlier this month?
Treasury Yields are trending lower and I don't think the stock or bond market would like the idea of a reversal here. But once again the weakness in yields is not helping the small caps all that much as it once did earlier in the year.
The dollar was down for a second day helping the I-fund to a nice day on Tuesday. The 2-day pullback nearly filled an open gap, and that may be all that this pullback wants to do, but if it can retrace that large bullish candle, there may be more downside left in the pullback, which would help the I-fund, and to a lesser degree, the US stocks as well.
It also happens to be a quadruple witching expiration week and that means tomorrow will likely be a high volume and perhaps volatile day, depending where the bulk of the strike prices on some of the major stock indices options and futures contracts are. There's a lot of pushing and pulling going on on these days.
The S&P 500 (C-fund) is still climbing that wall of worry as more and more people expect a pullback, and you know how that goes -- the more people expecting something, the less likely it will happen. But when it does happen, they usually take out the dip buyers with them just to spread the pain to those late to the party. There's an open gap near 5375 that may need some attention.
DWCPF (S-fund) did rally on Tuesday, but nothing to write home about as it only filled a small open gap in the process. It did move back above the descending resistance line again, and that's something, but it has to hold for more than a couple of days. That old gap from early May is still impacting this chart.
The EFA (I-fund) had a big day on Tuesday leading the TSP funds on the upside, and that was with the help of a weak dollar. The dollar is at the top of a range after a failed breakout, so perhaps it needs to test the lower end again? Maybe, but once that gap is filled on the UUP chart, it could find support - although retracing that large bullish candlestick down toward 28.6 is also possible.
BND (bonds / F-fund) rallied again as yields have continued to trend lower since one of the inflation reports a while back. This remains in a bullish channel, but it's pressing near the top of that channel and there is a lot of room below if it decides to do some backing and filling of some of those open gaps.
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.
