The stock indices were pretty sticky to the break even area for most of the day yesterday despite a slightly hotter than expected PPI report. But some very late selling pushed them close the lows of the day's very tight trading range in front of this mornings CPI report. The Dow lost 28-points, giving up a triple digit gain just minutes before the closing bell. For the S&P 500 and the Nasdaq it was the sixth consecutive negative day as investors continue to show their nerves leading up to the important CPI.
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The market could go one of many different directions today after the release of the CPI report before the opening bell. Of course the data from that report matters but at this point the bulls may need to see some kind of a washout sell off that scares out all but the stalwart bulls. Fear and volatility have been high and we could be on the cusp of some kind of oversold rally, but the indices are sitting on the precipice of support and maybe that support needs to break, take out the stops, and send the weaker bulls running before we get some kind of October rally.
Yes, this month started with a big two-day rally but that fizzled quickly and that pushed investor sentiment even lower than it already was and potentially closer to the "I give up" phase of the bear market. We haven't seen that yet and it could be months away, but we are possibly near a short-term pivot point, based on the head and shoulders patterns that we have been watching develop for months on many of the charts. Here's the Russell 2000 small caps ETF...
The CPI could either be better than expected and we see a big bounce. It could be weak and send the indices to another leg lower extending this bear market. The other options would be a fake out, meaning some kind of "get me out" sell off after the CPI, but a quick reversal once it appears to be overdone, or a modest rally that fails followed by another round of selling. Here they are in that order.
Without giving away too much information in this public commentary about where the TSP Talk Plus System has its money right now, let's just say another wave of selling could easily get me to add stocks to my account allocation for a trade. How long I would hold that is another story. I am still using a hit and run approach while this bear market plays out. We've seen relief rallies last 2 to 5 days, and we saw a two month bear market rally over the summer, so you never know for sure.
The yield on the 10-year yield was down and the dollar was flat so the breeze was slightly at the backs of the bulls yesterday. Today's CPI report could magnify that by pushing the yield down away from the 4% resistance area, or cause it to breakout to new highs which would almost certainly translate into new lows for the indices.
I'll post this chart again to remind you that seasonality is going to be on the bulls' side in the final months of this mid-term election year. That doesn't mean stocks will go up, but it's another stiff breeze at the back of the market that could help, whether that creates a rally, or maybe just less severe selling than we might have seen.
Lots of speculation going forward, and no certainty. At this point, after the CPI release, it is reaction time, rather than planning time. It's not easy to time the market so if you have any concerns about losing money, this may not be the time to be in stocks for you. But opportunities will come and go for those on the lookout. Good luck, whatever you decide!
The S&P 500 (C-fund) chart looks so daunting as we saw a new low yesterday, a long downtrend, and a head and shoulders pattern that is flirting with the support line now. It is down about 200-points in the last 6 trading days, and the last relief rally failed rather quickly. There's a lot going wrong here but sometimes when everything looks bad - news, charts, sentiment, outlook, it could be the perfect time to expect the unexpected. Will that happen?
The DWCPF (S-fund) was down slightly but basically flat in this volatile market. The head and shoulders pattern looks scary here as well, as does just about everything else. Not a lot of overhead gaps are getting filled in this bear market, but I'm really curious to find out if this chart could breakdown before that open gap near 1600 gets filled.
The BND (bonds / F-fund) got a little relief and yields slipped lower despite that tick up in the Producer Price Index yesterday. Support held for another day, but how strong is it? It's not a great formation but a double bottom low is not out of the question.
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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The market could go one of many different directions today after the release of the CPI report before the opening bell. Of course the data from that report matters but at this point the bulls may need to see some kind of a washout sell off that scares out all but the stalwart bulls. Fear and volatility have been high and we could be on the cusp of some kind of oversold rally, but the indices are sitting on the precipice of support and maybe that support needs to break, take out the stops, and send the weaker bulls running before we get some kind of October rally.
Yes, this month started with a big two-day rally but that fizzled quickly and that pushed investor sentiment even lower than it already was and potentially closer to the "I give up" phase of the bear market. We haven't seen that yet and it could be months away, but we are possibly near a short-term pivot point, based on the head and shoulders patterns that we have been watching develop for months on many of the charts. Here's the Russell 2000 small caps ETF...
The CPI could either be better than expected and we see a big bounce. It could be weak and send the indices to another leg lower extending this bear market. The other options would be a fake out, meaning some kind of "get me out" sell off after the CPI, but a quick reversal once it appears to be overdone, or a modest rally that fails followed by another round of selling. Here they are in that order.
Without giving away too much information in this public commentary about where the TSP Talk Plus System has its money right now, let's just say another wave of selling could easily get me to add stocks to my account allocation for a trade. How long I would hold that is another story. I am still using a hit and run approach while this bear market plays out. We've seen relief rallies last 2 to 5 days, and we saw a two month bear market rally over the summer, so you never know for sure.
The yield on the 10-year yield was down and the dollar was flat so the breeze was slightly at the backs of the bulls yesterday. Today's CPI report could magnify that by pushing the yield down away from the 4% resistance area, or cause it to breakout to new highs which would almost certainly translate into new lows for the indices.
I'll post this chart again to remind you that seasonality is going to be on the bulls' side in the final months of this mid-term election year. That doesn't mean stocks will go up, but it's another stiff breeze at the back of the market that could help, whether that creates a rally, or maybe just less severe selling than we might have seen.
Lots of speculation going forward, and no certainty. At this point, after the CPI release, it is reaction time, rather than planning time. It's not easy to time the market so if you have any concerns about losing money, this may not be the time to be in stocks for you. But opportunities will come and go for those on the lookout. Good luck, whatever you decide!
The S&P 500 (C-fund) chart looks so daunting as we saw a new low yesterday, a long downtrend, and a head and shoulders pattern that is flirting with the support line now. It is down about 200-points in the last 6 trading days, and the last relief rally failed rather quickly. There's a lot going wrong here but sometimes when everything looks bad - news, charts, sentiment, outlook, it could be the perfect time to expect the unexpected. Will that happen?
The DWCPF (S-fund) was down slightly but basically flat in this volatile market. The head and shoulders pattern looks scary here as well, as does just about everything else. Not a lot of overhead gaps are getting filled in this bear market, but I'm really curious to find out if this chart could breakdown before that open gap near 1600 gets filled.
The BND (bonds / F-fund) got a little relief and yields slipped lower despite that tick up in the Producer Price Index yesterday. Support held for another day, but how strong is it? It's not a great formation but a double bottom low is not out of the question.
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.
