It was a wild day of trading yesterday complete with a stomach drop into the final descent on the roller coaster. Some panic selling in the morning, followed by a rally that erased all of those losses, then a late sell off that took the indices near their lows again. Not great but feeling capitulatory. Both the C and S-funds lost another 1.2% yesterday, and the I-fund tacked on another modest gain as the dollar continued to slide lower.
While the hopes of a last minute reprieve from the tariffs did not come about, after the closing bell yesterday there were reports of a compromise being worked out that may be officially announced today.
The action has been almost straight down for several days but yesterday it was an intraday roller coaster. At the lows yesterday the S&P 500 was down 117-points. It recaptured all of that by the last hour of trading and was actually up 15-points before someone pulled the plug again in that final 30+ minutes of trading. That's often the case when an intraday reversal starts too early.
I know I constantly bring this us, but it sure makes it tough for those of us trying to decide what to do as we get closer to the TSP trading deadline a noon.
That last half hour of trading turned a positive reversal day that took the S&P 500 back above that blue descending resistance line, back down closer to the lows of the day, and it closed near the bottom of the old gap from Election Day - testing the January lows again.
The 6% decline since the February 19th peak is not an unusual loss, but it happened so quickly, and it came off one of the more bullish trading patterns that we normally see, so it was on the shocking side. It certainly took me by surprise, but we've been down this road before with President Trump, and whether you love him, or hate him, he's going make moves that will shake things up and it's a big change from Biden's presidency, so we just have to adjust.
President Trump delivered his address to a joint session of Congress on Tuesday night. It hasn't occurred yet as I write this but I'm sure, on top of those possible compromises on tariffs, we'll have more fodder to feed the volatility.
There have been a few areas of the market that have kept me optimistic. One being the High Yields Bonds, which still show a bullish credit market. Another was the Fed liquidity which should have a positive impact on markets as it unfolds in the weeks ahead. Another had been the way the financial stocks were holding up. You don't get a recession when the banks are doing well, and just Monday the XLF Financial ETF hit an all time high. But ...
... fast forward a day and we got the chart above. It's not horrible, but now that open gap near 48.30 is back in the picture, and perhaps a recession is peaking its head again. There are a lot of good arguments for not seeing a recession, but we can't deny that recent actions have increased the chances.
I updated this next statement late on Monday while creating Tuesday's commentary, so in case anyone was reading early and missed it, I said, "We have, however, been getting several Titanic Syndrome warning signals. They are by no means pleasant when they work -- when they work. The problem is, you don't which signals will precede a major fall and which will be false flags. Be careful."
Those often, but not always, precede major market declines. Now we can say we've had a major decline already, but so far it has been a typical pullback (6%), which we see on average a couple of times each year. I think I read 30+ since the 2009 bear market bottom.
We'll get the February jobs report on Friday. Estimates are looking for a gain of 145,000 jobs and an unemployment rate of 4.0%.
DWCPF (S-fund) matched the loss of the S&P 500 yesterday, and like the S&P, it had turned positive in that final hour of the day before collapsing again. It did close below the bull flag and now there's another open gap that comes into the picture near 2175. It has now closed below its 200-day EMA for two straight days. It's do or die time here.
ACWX (the I-fund tracking index) closed positive and this fund continues to outperform. The dollar tanked and that was the main reason the I-fund held on. The rising trading channel did break but the support near 55 is still being tested and holding. There are some moving averages and open gaps below that would love to get tested, however.
BND (F-fund) was up early during the panic selling in stocks, but it reversed late when stocks were recovering. The bond market closes an hour earlier than the stock market and perhaps there would have been more of a reaction in bonds during that last half hour if they were open. This still looks strong but there are also some pullback targets on the chart.
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
Questions, comments, or issues with today's commentary? We can discuss it in the Forum.
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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 may use additional methods and strategies to determine fund positions.
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While the hopes of a last minute reprieve from the tariffs did not come about, after the closing bell yesterday there were reports of a compromise being worked out that may be officially announced today.
The action has been almost straight down for several days but yesterday it was an intraday roller coaster. At the lows yesterday the S&P 500 was down 117-points. It recaptured all of that by the last hour of trading and was actually up 15-points before someone pulled the plug again in that final 30+ minutes of trading. That's often the case when an intraday reversal starts too early.
I know I constantly bring this us, but it sure makes it tough for those of us trying to decide what to do as we get closer to the TSP trading deadline a noon.
That last half hour of trading turned a positive reversal day that took the S&P 500 back above that blue descending resistance line, back down closer to the lows of the day, and it closed near the bottom of the old gap from Election Day - testing the January lows again.
The 6% decline since the February 19th peak is not an unusual loss, but it happened so quickly, and it came off one of the more bullish trading patterns that we normally see, so it was on the shocking side. It certainly took me by surprise, but we've been down this road before with President Trump, and whether you love him, or hate him, he's going make moves that will shake things up and it's a big change from Biden's presidency, so we just have to adjust.
President Trump delivered his address to a joint session of Congress on Tuesday night. It hasn't occurred yet as I write this but I'm sure, on top of those possible compromises on tariffs, we'll have more fodder to feed the volatility.
There have been a few areas of the market that have kept me optimistic. One being the High Yields Bonds, which still show a bullish credit market. Another was the Fed liquidity which should have a positive impact on markets as it unfolds in the weeks ahead. Another had been the way the financial stocks were holding up. You don't get a recession when the banks are doing well, and just Monday the XLF Financial ETF hit an all time high. But ...
... fast forward a day and we got the chart above. It's not horrible, but now that open gap near 48.30 is back in the picture, and perhaps a recession is peaking its head again. There are a lot of good arguments for not seeing a recession, but we can't deny that recent actions have increased the chances.
I updated this next statement late on Monday while creating Tuesday's commentary, so in case anyone was reading early and missed it, I said, "We have, however, been getting several Titanic Syndrome warning signals. They are by no means pleasant when they work -- when they work. The problem is, you don't which signals will precede a major fall and which will be false flags. Be careful."
Those often, but not always, precede major market declines. Now we can say we've had a major decline already, but so far it has been a typical pullback (6%), which we see on average a couple of times each year. I think I read 30+ since the 2009 bear market bottom.
We'll get the February jobs report on Friday. Estimates are looking for a gain of 145,000 jobs and an unemployment rate of 4.0%.
DWCPF (S-fund) matched the loss of the S&P 500 yesterday, and like the S&P, it had turned positive in that final hour of the day before collapsing again. It did close below the bull flag and now there's another open gap that comes into the picture near 2175. It has now closed below its 200-day EMA for two straight days. It's do or die time here.
ACWX (the I-fund tracking index) closed positive and this fund continues to outperform. The dollar tanked and that was the main reason the I-fund held on. The rising trading channel did break but the support near 55 is still being tested and holding. There are some moving averages and open gaps below that would love to get tested, however.
BND (F-fund) was up early during the panic selling in stocks, but it reversed late when stocks were recovering. The bond market closes an hour earlier than the stock market and perhaps there would have been more of a reaction in bonds during that last half hour if they were open. This still looks strong but there are also some pullback targets on the chart.
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
Questions, comments, or issues with today's commentary? We can discuss it in the Forum.
Daily Market Commentary Archives
For more info our other premium services, please go here... www.tsptalk.com/premiums.php
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 may use additional methods and strategies to determine fund positions.
