The new week started with a bit of a roller coaster ride with a slow grind higher to a crescendo peak in the afternoon before a lot of screaming passengers dropped into the closing bell. The Dow lost 211-points and the S&P 500 basically gave up Friday's gains, leaving some charts in very interesting situations that threatened recent breakouts. The bond market reopened after being closed on Friday and yields moved up (F-fund down), as did the dollar after last week's sharp decline.
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Because of the holiday on Friday, the TSP share prices and share returns above include the action from Friday and Monday.
The selling in the final hour was certainly suspicious. We will get the Producer Price Index / PPI Report on Tuesday morning and after what we saw happen into the closing bell yesterday, I wonder if someone knew something? Hmmm.
The yield on the 10-year Treasury was up and it looks like it may try to bounce off of the 50-day EMA. That would be a reasonable expectation in the short-term. The question is whether it is a sustainable bounce and a low or if it's just one of those dead cat bounces after the sharp decline?
The dollar had been in a free fall since the CPI report last Thursday and here as well we could see a dead cat bounce, maybe even a fill of one or more of the open gaps overhead. Or will the PPI report or something else trigger a bottom for this pullback?
Those answers would probably help tell us which way stocks will go, but what it is really telling is what to expect from the Federal Reserve with respect to interest rate hikes at the next FOMC meetings.
While the stock market cheered the lower than expected Consumer Price Report (CPI) last week, which created the expectation that the Fed might only raise interest rate 0.50% next month instead of 0.75%, this chart shows us what happened in 2007 - 2008 when the Fed was cutting interest rates a rapid pace. I count 10 times that the Fed cut rates - as opposed to just raising less than originally expected as we see this time around.
There were certainly some decent bounces after the rate cuts, yet it took a year and a half from that first cut in September 2007 until the March 2009 market bottom.
So, is it reasonable to think the market has bottomed after some speculation that one CPI report might keep rates from going up an extra 0.25% next month? It's not like the Fed is cutting rates. They may have to cut rates in 2023 after they push the economy into a recession.
I don't know what will happen, so I am just thinking out loud.
We'll get some retail sales numbers starting this morning and that could be a catalyst this week.
The S&P 500 (C-fund) failed to hold above that rising resistance line, which happens to be the top of a bear flag. Was Friday's holiday action a fake out to the upside? It could also have been just a day of rest after a monster 2-day rally, but the chart makes it look more interesting than that with a lot on the line with that bear flag and open gap below. There is also an open gap above at about 4075, which happens to be where the 200-day moving average is, so that looks possible as well. Trading volume was quite light so I'm not sure triggered all that late selling yesterday.
The DWCPF (small caps / S-fund) flipped over and ended the day with a hefty loss and it was lagging for much of the day before that last hour of trading. It too is back below resistance, but yesterday's low near the close did fill in a small open gap, so perhaps that was all it was trying to do? That is if it is going to ignore the large open gap down near 1600.
The EFA (I-fund) has been on fire this month. I don't have the I-fund price for Monday yet but I suspect it may not be as bad as the -1.05% loss in the EFA. I only say that because of the late selling in US stocks and the overseas markets were long closed by then. Maybe the TSP will adjust for that. Lots of open gaps below as potential pullback targets.
The longer term chart shows an impressive breakout on this chart, however. There's some resistance at Friday's high but the large down trend had been broken again this month after last Augusts' failed breakout.
BND (bonds / F-fund) was down as yields bounce higher yesterday.
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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Because of the holiday on Friday, the TSP share prices and share returns above include the action from Friday and Monday.
The selling in the final hour was certainly suspicious. We will get the Producer Price Index / PPI Report on Tuesday morning and after what we saw happen into the closing bell yesterday, I wonder if someone knew something? Hmmm.
The yield on the 10-year Treasury was up and it looks like it may try to bounce off of the 50-day EMA. That would be a reasonable expectation in the short-term. The question is whether it is a sustainable bounce and a low or if it's just one of those dead cat bounces after the sharp decline?
The dollar had been in a free fall since the CPI report last Thursday and here as well we could see a dead cat bounce, maybe even a fill of one or more of the open gaps overhead. Or will the PPI report or something else trigger a bottom for this pullback?
Those answers would probably help tell us which way stocks will go, but what it is really telling is what to expect from the Federal Reserve with respect to interest rate hikes at the next FOMC meetings.
While the stock market cheered the lower than expected Consumer Price Report (CPI) last week, which created the expectation that the Fed might only raise interest rate 0.50% next month instead of 0.75%, this chart shows us what happened in 2007 - 2008 when the Fed was cutting interest rates a rapid pace. I count 10 times that the Fed cut rates - as opposed to just raising less than originally expected as we see this time around.
There were certainly some decent bounces after the rate cuts, yet it took a year and a half from that first cut in September 2007 until the March 2009 market bottom.
So, is it reasonable to think the market has bottomed after some speculation that one CPI report might keep rates from going up an extra 0.25% next month? It's not like the Fed is cutting rates. They may have to cut rates in 2023 after they push the economy into a recession.
I don't know what will happen, so I am just thinking out loud.
We'll get some retail sales numbers starting this morning and that could be a catalyst this week.
The S&P 500 (C-fund) failed to hold above that rising resistance line, which happens to be the top of a bear flag. Was Friday's holiday action a fake out to the upside? It could also have been just a day of rest after a monster 2-day rally, but the chart makes it look more interesting than that with a lot on the line with that bear flag and open gap below. There is also an open gap above at about 4075, which happens to be where the 200-day moving average is, so that looks possible as well. Trading volume was quite light so I'm not sure triggered all that late selling yesterday.
The DWCPF (small caps / S-fund) flipped over and ended the day with a hefty loss and it was lagging for much of the day before that last hour of trading. It too is back below resistance, but yesterday's low near the close did fill in a small open gap, so perhaps that was all it was trying to do? That is if it is going to ignore the large open gap down near 1600.
The EFA (I-fund) has been on fire this month. I don't have the I-fund price for Monday yet but I suspect it may not be as bad as the -1.05% loss in the EFA. I only say that because of the late selling in US stocks and the overseas markets were long closed by then. Maybe the TSP will adjust for that. Lots of open gaps below as potential pullback targets.
The longer term chart shows an impressive breakout on this chart, however. There's some resistance at Friday's high but the large down trend had been broken again this month after last Augusts' failed breakout.
BND (bonds / F-fund) was down as yields bounce higher yesterday.
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.
