Stocks were mixed yesterday but a late surge of high volume trading in the final minutes turned the S&P 500 from negative to positive as end of month window dressing took over. The Nasdaq closed down but it also closed well off the 1% loss it had earlier in the day as buy programs hit the market with about 15 minutes left in the trading day. The Dow had a 500+ point gain thanks to a huge move in Salesforce.com, and that moved the Dow to a new high for the year. Bonds were down as yields moved higher.
[TABLE="align: center"]
[TR]
[TD="align: center"]
[/TD]
[TD]
[/TD]
[TD="width: 338, align: center"] Daily TSP Funds Return
[TABLE="align: center"]
[TR]
[TD="align: right"][/TD]
[/TR]
[/TABLE]
[/TD]
[/TR]
[/TABLE]
The PCE Prices report came in and reiterated that inflation is no longer hot, and that sent the futures higher initially yesterday, but we did see some profit taking in the broader indices shortly after the opening the bell sending the S&P and Nasdaq into negative territory, but as you can see above, there was a late rally that sent the S&P 500 to its highs of the day.
GDPNow had a GDP estimate of 5.4% in October which turned out to be fairly close to the actual 3rd quarter GDP reported yesterday at 5.2%. Yesterday GDPNow came out with their latest 4th quarter estimate and it was revised down to 1.8%.
These estimates can change dramatically as the economic data comes in, but obviously 1.8% is a far cry from 5.2% so the economy is slowing down quite a bit. A recession is not official until we get two quarters of negative GDP in a row. If that turns out to be the case in 2024, that is seeing GDP go from 5% growth to multiple negative months, that might explain why bonds yields were so high earlier this year, and why they are now falling rapidly.
What is puzzling is why yields fell so sharply on Wednesday when the 5.2% number was released, and why yields rallied sharply yesterday when GDPNow reported the 1.8% figure.
The 10-Year Treasury Yield and the dollar were up sharply yesterday, which is not something you'd see if growth is slowing. Was it a case of sell the rumor (yields lower), buy the news (yields higher)? Being the final day of a huge month for the bond market (as well as the stock market) we may have been seeing some profit taking in bonds. Remember, bond yields move in the opposite direction to bond prices and the F-fund. But also, open gaps on the yields and the BND chart were filled yesterday, which could account for the action.
Another tell of economic weakness was the 2.4% decline in the price of oil yesterday, and that chart looks like it is ready to break down. Good for us, but bad sign for the economy.
A little follow up to yesterday's commentary regarding the Transportation Index, which is one of the more economically sensitive indices we have: The Transports rallied 1.36% yesterday, bouncing off the 50 and 200-day EMA after initially crashing below them again in early trading. That's two false breakdowns this week.
The small caps of the Russell 2000 has a similar look and I hate admit it, since I am still far from fully invested, the chart looks very bullish.
So, the charts look great and December may come out of the gate running, but the indices are still very overbought, they are near some possible resistance as you'll see in the charts below, and the data is suggesting a slowdown in 2024, so how much further can they run?
The last half of December with the Santa Claus rally and bullish reputation, has a much better historical record than the first half of the month, which is no better than average.
The S&P 500 (C-fund) has been churning sideways, and as our TSP Talk Plus subscribers know, I had a strong sell signal for this past week and the best the bears could do was hold it sideways. The question from here is whether the consolidation is a pause that is gathering steam for another push higher, or if this is another flat top situation like we saw in October that eventually broke down?
DWCPF (S-fund) continues to ride up the ascending channel, which is also an F-flag, but no sign of a breakdown yet. I believe I have been saying for a week that these F-flags tend to breakdown, but they also can hold inside the rising flag for longer than expected. It's a bullish looking chart, no doubt, but testing the breakout area and the open gaps is always a possibility.
EFA (I-fund) was down slightly yesterday, but that was actually impressive with the dollar up 0.72%. We may see some adjusting from the overseas markets in today's action.
BND (bonds / F-fund) fell yesterday, but only enough to fill this week's open gap. That's what is supposed to happen to gaps, but the large gaps below refuse to play along with technical analysis.
Thanks so much for reading! Have a great weekend!
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
For more info our other premium services, please go here... www.tsptalk.com/premiums.html
Daily Market Commentary Archives
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 use additional methods and strategies to determine fund positions.
[TABLE="align: center"]
[TR]
[TD="align: center"]
[TD]
[/TD]
[TD="width: 338, align: center"] Daily TSP Funds Return
[TR]
[TD="align: right"][/TD]
[/TR]
[/TABLE]
[/TD]
[/TR]
[/TABLE]
The PCE Prices report came in and reiterated that inflation is no longer hot, and that sent the futures higher initially yesterday, but we did see some profit taking in the broader indices shortly after the opening the bell sending the S&P and Nasdaq into negative territory, but as you can see above, there was a late rally that sent the S&P 500 to its highs of the day.
GDPNow had a GDP estimate of 5.4% in October which turned out to be fairly close to the actual 3rd quarter GDP reported yesterday at 5.2%. Yesterday GDPNow came out with their latest 4th quarter estimate and it was revised down to 1.8%.
These estimates can change dramatically as the economic data comes in, but obviously 1.8% is a far cry from 5.2% so the economy is slowing down quite a bit. A recession is not official until we get two quarters of negative GDP in a row. If that turns out to be the case in 2024, that is seeing GDP go from 5% growth to multiple negative months, that might explain why bonds yields were so high earlier this year, and why they are now falling rapidly.
What is puzzling is why yields fell so sharply on Wednesday when the 5.2% number was released, and why yields rallied sharply yesterday when GDPNow reported the 1.8% figure.
The 10-Year Treasury Yield and the dollar were up sharply yesterday, which is not something you'd see if growth is slowing. Was it a case of sell the rumor (yields lower), buy the news (yields higher)? Being the final day of a huge month for the bond market (as well as the stock market) we may have been seeing some profit taking in bonds. Remember, bond yields move in the opposite direction to bond prices and the F-fund. But also, open gaps on the yields and the BND chart were filled yesterday, which could account for the action.
Another tell of economic weakness was the 2.4% decline in the price of oil yesterday, and that chart looks like it is ready to break down. Good for us, but bad sign for the economy.
A little follow up to yesterday's commentary regarding the Transportation Index, which is one of the more economically sensitive indices we have: The Transports rallied 1.36% yesterday, bouncing off the 50 and 200-day EMA after initially crashing below them again in early trading. That's two false breakdowns this week.
The small caps of the Russell 2000 has a similar look and I hate admit it, since I am still far from fully invested, the chart looks very bullish.
So, the charts look great and December may come out of the gate running, but the indices are still very overbought, they are near some possible resistance as you'll see in the charts below, and the data is suggesting a slowdown in 2024, so how much further can they run?
The last half of December with the Santa Claus rally and bullish reputation, has a much better historical record than the first half of the month, which is no better than average.
The S&P 500 (C-fund) has been churning sideways, and as our TSP Talk Plus subscribers know, I had a strong sell signal for this past week and the best the bears could do was hold it sideways. The question from here is whether the consolidation is a pause that is gathering steam for another push higher, or if this is another flat top situation like we saw in October that eventually broke down?
DWCPF (S-fund) continues to ride up the ascending channel, which is also an F-flag, but no sign of a breakdown yet. I believe I have been saying for a week that these F-flags tend to breakdown, but they also can hold inside the rising flag for longer than expected. It's a bullish looking chart, no doubt, but testing the breakout area and the open gaps is always a possibility.
EFA (I-fund) was down slightly yesterday, but that was actually impressive with the dollar up 0.72%. We may see some adjusting from the overseas markets in today's action.
BND (bonds / F-fund) fell yesterday, but only enough to fill this week's open gap. That's what is supposed to happen to gaps, but the large gaps below refuse to play along with technical analysis.
Thanks so much for reading! Have a great weekend!
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
For more info our other premium services, please go here... www.tsptalk.com/premiums.html
Daily Market Commentary Archives
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 use additional methods and strategies to determine fund positions.
