Stocks continued their winning ways on Thursday as we saw a relief rally of sorts. Relief that the Fed did not raise rates and, as we talked about yesterday, the market really doesn't seem to believe that they are going to raise again this year, despite the threats during Powell's press conference. The Dow, S&P 500 (C), Nasdaq, and the S-fund all gained about 1.2% on the day. Despite another big decline in the dollar, the I-fund lagged the US stocks a bit yesterday, but posted a big gain as well. Bonds were up as yields fell sharply.
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The action has been really good. Some of that sideline money that we have been talking has clearly made its way into the market. So much so that the high levels of pessimism that we often saw in the first 6 months of the year, has turned into extreme optimism, so that raises a short-term warning flag, although the switch from pessimism to optimism normally triggers the best rallies. But once it gets extreme, the opposite effect could be also triggered.
The market breadth was very bullish yesterday with the advancing issues and volume heavily outweighing the declining. New highs are jumping and we are seeing fewer and fewer new lows. All good, but too much of a good thing can mean the easy money may have already been made.
The ducks are rarely all in a row, but that's not a bad thing. When all the ducks are in a row, the market has usually priced them all in already since the market indices are forward looking, and would probably mean that we are closer to top than a buying opportunity.
With the S&P 500 running up from 3500 in October to the current 4426, or +26% in 8 months, a lot of good news has been priced in despite headlines that might not sound all that great. Is this a top or just the start? Who knows for sure, but this current chart looks a lot like some of these other peaks we saw over the last 18 months.
Back in March of 2022 there was a big rebound after a decline. Surely that rally cemented in a low and was a time to believe that the worst was behind us...
Oh, wait. Here it is. This two month rally is so strong, clearly we need to get onboard, right?
OK, this one is really for real, right? Well, technically the chart looks a lot better with the new higher lows and higher highs, so a bottom may be in, but stocks don't typically go straight up whether in a bull market or not.
I'm not calling for new lows, but would it be unrealistic to see a pullback to 4200, or even 4100? That would still keep the rising trading channel intact.
Just be mentally prepared for either possibility - more nose-bleed upside, or a serious correction. And whichever happens, this new technical bull market can remain alive -- until it breaks again. As we talked about yesterday, this A.I. rally could be the 2023 version of the dot com internet rally that lasted for 5 years, but that one was very wild with wide swings in both directions.
A couple of the market leaders that had been lagging all year, are trying to catch up. The Transports and the Russell 2000 look so much better than they did just a couple of weeks ago, but it could be too far too fast. A little pullback wouldn't hurt. But perhaps it is time for these two to play catch up?
Monday is a holiday and both the stock market and the TSP will be closed, so we won't be posting commentaries or reports that day. Any TSP transactions made after 12 noon ET on Friday won't be effective until Tuesday's COB.
The S&P 500 (C-fund) has had a great first half of June and is up about 600-points since the March low, and it is hitting some resistance and could be due for a rest. However, it has been the underinvested that had the cash on the sidelines that has, and may continue to, fuel this rally. We have seen a major shift in sentiment which has gotten much more bullish, so perhaps the cash on the sidelines is coming back to normal levels. The chart is stretched, but technically nothing is broken yet. A pullback could start today, next week, or next month, but it is coming. The buy and holders will take that loss for sure. Will you?
The DWCPF (S-fund) filled an open gap on Wednesday and held, and yesterday it added onto the the recent rally making another higher high. This looks stretched as well after blasting through several levels of resistance this month. Will we see some profit taking at these levels or is there more to go? Small caps had been lagging so it may still be playing catch up.
The EFA (I-fund) was up big but could have done better with the UUP down 0.57% yesterday, and the actual dollar futures were down 0.80%. By the way, the UUP has some long-term support near 28, so I'll be curious to see if that area can hold if tested.
BND (Bonds / F-fund) rallied back up into resistance opening up another gap below in the process and it is now testing some serious support which, if it can break above it, would likely move up to the 73.45 area pretty quickly. There's an open gap there as well.
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. Have a great holiday weekend! We'll see you on Tuesday.
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 action has been really good. Some of that sideline money that we have been talking has clearly made its way into the market. So much so that the high levels of pessimism that we often saw in the first 6 months of the year, has turned into extreme optimism, so that raises a short-term warning flag, although the switch from pessimism to optimism normally triggers the best rallies. But once it gets extreme, the opposite effect could be also triggered.
The market breadth was very bullish yesterday with the advancing issues and volume heavily outweighing the declining. New highs are jumping and we are seeing fewer and fewer new lows. All good, but too much of a good thing can mean the easy money may have already been made.
The ducks are rarely all in a row, but that's not a bad thing. When all the ducks are in a row, the market has usually priced them all in already since the market indices are forward looking, and would probably mean that we are closer to top than a buying opportunity.
With the S&P 500 running up from 3500 in October to the current 4426, or +26% in 8 months, a lot of good news has been priced in despite headlines that might not sound all that great. Is this a top or just the start? Who knows for sure, but this current chart looks a lot like some of these other peaks we saw over the last 18 months.
Back in March of 2022 there was a big rebound after a decline. Surely that rally cemented in a low and was a time to believe that the worst was behind us...
Oh, wait. Here it is. This two month rally is so strong, clearly we need to get onboard, right?
OK, this one is really for real, right? Well, technically the chart looks a lot better with the new higher lows and higher highs, so a bottom may be in, but stocks don't typically go straight up whether in a bull market or not.
I'm not calling for new lows, but would it be unrealistic to see a pullback to 4200, or even 4100? That would still keep the rising trading channel intact.
Just be mentally prepared for either possibility - more nose-bleed upside, or a serious correction. And whichever happens, this new technical bull market can remain alive -- until it breaks again. As we talked about yesterday, this A.I. rally could be the 2023 version of the dot com internet rally that lasted for 5 years, but that one was very wild with wide swings in both directions.
A couple of the market leaders that had been lagging all year, are trying to catch up. The Transports and the Russell 2000 look so much better than they did just a couple of weeks ago, but it could be too far too fast. A little pullback wouldn't hurt. But perhaps it is time for these two to play catch up?
Monday is a holiday and both the stock market and the TSP will be closed, so we won't be posting commentaries or reports that day. Any TSP transactions made after 12 noon ET on Friday won't be effective until Tuesday's COB.
The S&P 500 (C-fund) has had a great first half of June and is up about 600-points since the March low, and it is hitting some resistance and could be due for a rest. However, it has been the underinvested that had the cash on the sidelines that has, and may continue to, fuel this rally. We have seen a major shift in sentiment which has gotten much more bullish, so perhaps the cash on the sidelines is coming back to normal levels. The chart is stretched, but technically nothing is broken yet. A pullback could start today, next week, or next month, but it is coming. The buy and holders will take that loss for sure. Will you?
The DWCPF (S-fund) filled an open gap on Wednesday and held, and yesterday it added onto the the recent rally making another higher high. This looks stretched as well after blasting through several levels of resistance this month. Will we see some profit taking at these levels or is there more to go? Small caps had been lagging so it may still be playing catch up.
The EFA (I-fund) was up big but could have done better with the UUP down 0.57% yesterday, and the actual dollar futures were down 0.80%. By the way, the UUP has some long-term support near 28, so I'll be curious to see if that area can hold if tested.
BND (Bonds / F-fund) rallied back up into resistance opening up another gap below in the process and it is now testing some serious support which, if it can break above it, would likely move up to the 73.45 area pretty quickly. There's an open gap there as well.
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. Have a great holiday weekend! We'll see you on Tuesday.
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.
