The bulls put up another late fight on Friday but it has been the bears winning the battles this month, and it has been one step forward, two steps back for stocks this month. The Dow lost another 337-points with 1% or more losses in most indices. It was a lot worse at 10am in the morning, but the bears were able to keep the red on the board into the close. The PCE Prices report came in hot again and that has the market preparing for even higher interest rates. That pushed yields higher and bond prices lower, spoiling Thursday's nice rally in bonds.
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Despite the downward momentum which has been gaining steam in February, it actually feels like the market wants to go higher, but the data hasn't been good enough to change things. Why does it feel like the market wants to go higher?
The S&P 500 has been falling for the last couple of weeks, but in 7 of the last 10 trading days it has closed well off the lows and actually near the highs of the day (green arrows), even on negative days, so the bulls are still battling. Unfortunately for them, when the bears take over and 'win' the day during that period, they are doing some serious damage (red arrows.)
The technical damage is being done on the S&P 500 chart as it closed below the 50 and 200-day EMAs all week. That's a red flag, although the other TSP fund stock charts are in better shape, for now.
The S-fund was down another 1% on Friday but the late buying pushed it back up toward its highs of the day creating a positive reversal day and it closed above its 50 and 200-day EMAs again. It's not out of trouble yet, but that close helped keep the bulls in the game.
We might as well get into the S-fund chart a little deeper since we're talking about it. The inverted head and shoulders pattern broke out in late January, and a typical response from the H&S breakout is an eventual pullback to test the neckline breakout area again, and again it closed above the key 50 and 200 day averages, and that neckline. That's what happened last week. In the process a bull flag (blue) formed. It could be a great setup, or it could be the end of the road if it can't hold above 1700.
The EFA (I-fund) is well above its 200-day EMA but on Friday it finally gave up the 50-day EMA. The sideways consolidation wasn't bad action after the dramatic rally it had in late 2022 and into January of this year, but it has been drifting lower over the last week or so. This chart also had plenty of strong finishes, even while it was drifting lower (green boxes), and Thursday's positive outside reversal day was looking promising as a bottom. But Friday changed that. It will have to get back above that 50-day EMA if it wants to fill in that red open gap.
We talked about the February seasonality chart last week and it was a pretty good guide for how the month played out. February is the third worse month of the year based on historical averages. I don't use seasonality as a primary indicator, except for maybe around major holidays, but this month would have been a good month for us to base our account allocations.
Chart provided courtesy of www.sentimentrader.com
Next month tends to be more bullish but as far as percentage of times positive for each particular day, it's rather choppy during the first half of the month. Some of those red bars in the first half of the month were undoubtedly a result of the massive losses we saw in 2020 during the COVID crash.
Chart provided courtesy of www.sentimentrader.com
There's not a lot of market movers on the economic calendar this week, so that may help the bulls. But that may not stop the Fed members from commenting about how hawkish they are. Right now the market is pricing in a 73% chance of another 0.25% interest rate hike on March 22, with a 27% chance of a 0.50% increase.
The daily S&P 500 (C-fund) chart was posted above. Here is the weekly chart which is at a very serious pivot point. The 40-week moving average held at last week's lows. The descending resistance line, which was taken out in January, is being tested as support now. There's also some rising support coming off the prior lows being tested now as well. There is a very rare open gap on this weekly chart above 4200 that was flirted with, but never filled last month.
The DWCPF (S-fund) chart was posted above.
The EFA (I-fund) chart was posted above.
BND (bonds / F-fund) gapped down after the release of Friday's PCE Prices report, reversing the positive breakout from Thursday. There was a "quasi" open gap down near Friday's lows that got filled. If bonds fail here, stocks could follow, but if this chart can hold at the gap fill low, perhaps... But then there's that large open gap from last November near 70. Remember back then when everyone was so sure that inflation had peaked after a better than expected CPI?
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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[TR]
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[TD="width: 338, align: center"] Daily TSP Funds Return
[TR]
[TD="align: right"][/TD]
[/TR]
[/TABLE]
[/TD]
[/TR]
[/TABLE]
Despite the downward momentum which has been gaining steam in February, it actually feels like the market wants to go higher, but the data hasn't been good enough to change things. Why does it feel like the market wants to go higher?
The S&P 500 has been falling for the last couple of weeks, but in 7 of the last 10 trading days it has closed well off the lows and actually near the highs of the day (green arrows), even on negative days, so the bulls are still battling. Unfortunately for them, when the bears take over and 'win' the day during that period, they are doing some serious damage (red arrows.)
The technical damage is being done on the S&P 500 chart as it closed below the 50 and 200-day EMAs all week. That's a red flag, although the other TSP fund stock charts are in better shape, for now.
The S-fund was down another 1% on Friday but the late buying pushed it back up toward its highs of the day creating a positive reversal day and it closed above its 50 and 200-day EMAs again. It's not out of trouble yet, but that close helped keep the bulls in the game.
We might as well get into the S-fund chart a little deeper since we're talking about it. The inverted head and shoulders pattern broke out in late January, and a typical response from the H&S breakout is an eventual pullback to test the neckline breakout area again, and again it closed above the key 50 and 200 day averages, and that neckline. That's what happened last week. In the process a bull flag (blue) formed. It could be a great setup, or it could be the end of the road if it can't hold above 1700.
The EFA (I-fund) is well above its 200-day EMA but on Friday it finally gave up the 50-day EMA. The sideways consolidation wasn't bad action after the dramatic rally it had in late 2022 and into January of this year, but it has been drifting lower over the last week or so. This chart also had plenty of strong finishes, even while it was drifting lower (green boxes), and Thursday's positive outside reversal day was looking promising as a bottom. But Friday changed that. It will have to get back above that 50-day EMA if it wants to fill in that red open gap.
We talked about the February seasonality chart last week and it was a pretty good guide for how the month played out. February is the third worse month of the year based on historical averages. I don't use seasonality as a primary indicator, except for maybe around major holidays, but this month would have been a good month for us to base our account allocations.
Chart provided courtesy of www.sentimentrader.com
Next month tends to be more bullish but as far as percentage of times positive for each particular day, it's rather choppy during the first half of the month. Some of those red bars in the first half of the month were undoubtedly a result of the massive losses we saw in 2020 during the COVID crash.
Chart provided courtesy of www.sentimentrader.com
There's not a lot of market movers on the economic calendar this week, so that may help the bulls. But that may not stop the Fed members from commenting about how hawkish they are. Right now the market is pricing in a 73% chance of another 0.25% interest rate hike on March 22, with a 27% chance of a 0.50% increase.
The daily S&P 500 (C-fund) chart was posted above. Here is the weekly chart which is at a very serious pivot point. The 40-week moving average held at last week's lows. The descending resistance line, which was taken out in January, is being tested as support now. There's also some rising support coming off the prior lows being tested now as well. There is a very rare open gap on this weekly chart above 4200 that was flirted with, but never filled last month.
The DWCPF (S-fund) chart was posted above.
The EFA (I-fund) chart was posted above.
BND (bonds / F-fund) gapped down after the release of Friday's PCE Prices report, reversing the positive breakout from Thursday. There was a "quasi" open gap down near Friday's lows that got filled. If bonds fail here, stocks could follow, but if this chart can hold at the gap fill low, perhaps... But then there's that large open gap from last November near 70. Remember back then when everyone was so sure that inflation had peaked after a better than expected CPI?
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.
