It was another mixed day for stocks on Wednesday, which was almost a carbon copy of Tuesday's action -- only large tech stocks seemed to do well, and small caps lagged badly again. The Dow lost 282, making it almost 600 points over the last two days, but given the recent run up, that's not much relatively speaking. The Nasdaq Composite closed above 10,000 for the first time.
[TABLE="align: center"]
[TR]
[TD="align: center"] Daily TSP Funds Return
[TABLE="align: center"]
[TR]
[TD="align: right"] [/TD]
[/TR]
[/TABLE]
[/TD]
[TD][/TD]
[TD="align: center"]
[/TD]
[/TR]
[/TABLE]
The Fed did not raise rates and said they see rates staying zero 0% through 2022. They keep buying bonds, targeting $80 billion a month in Treasurys and $40 billion in mortgage-backed securities. So, the Fed's game continues to be easy money, and they basically told investors they have their backs. It's sounds bullish for stocks but combined with the government continuing plans to throw trillions at every problem despite the suffocating debt, the free market economy seems to be a thing of the past. I suppose in the short term it's a good thing.
The day started out like Tuesday with losses early, a low hit in early trading, followed by a midday rebound, but things got very choppy after the Fed's policy statement and there was some selling into the close again. For the second day we saw the Nasdaq 100 large cap tech index move to new all-time highs, while small caps (IWM) seemed to be the index investors sold to buy those names like Apple, Amazon, and Microsoft.
Stocks are obviously quite extended and overbought given what they've done over the last few months, but it's tough to tell if we're just seeing another 2 - 3 day pullback, or if something more meaningful is about to happen on the downside. Our intermediate-term indicators do show some weakness and we knew that we had to get a pause at some point. That seems to have already started in the small caps and S&P 500, but because of how fast those indicators improved since the lows, there's a good chance that the pullbacks will remain muted. That said, even a 10 - 15% correction would look like a small blip on the charts, but it wouldn't be fun to lose that in your account.
I am still concerned about black swan events in the coming months leading up to the election. There seems to be a bigger push lately in the news over another wave of the coronavirus manifesting. Can we see a repeat of the prior panic? Probably not of the same magnitude, but they're saying with the huge crowds we've seen at the protests all over the country, and Memorial Day gatherings, apparently it has a catalyst.
The S&P 500 (C-fund) slipped a half of a percent yesterday, a day that saw the Fed give the market pretty much everything it may have wanted to hear, so I was a little surprised that the initial rally after the Fed statement yesterday didn't hold into the close. Perhaps we're seeing a "sell the news" reaction to the rumor that every has been buying recently. That is, that the Fed has the market's back.
The DWCPF (S-fund) pulled back sharply for a second straight day, and that was just about enough to fill the open gap created by the the jobs report last Friday. It is still well up into the top of the large rising trading channel, with a lot of room below, but the 200-day EMA and SMAs are somewhere in between the top and bottom of that channel and could act as support on anymore downside action.
The EFA (I-fund) held up rather well, and once again...
... a sell-off in the dollar helped. The open gap that we've been watching is getting close to being filled.
The Dow Transportation Index was down 2.5% as it fell through its short-term rising trading channel (blue) but that 9500 area will surely try to act as support. Either that or a very weak open will gap it down below that support.
The BND (F-fund) had a huge day and Fed days tend to create big moves in the bond market. We saw new highs by the close after having broken down last week. New highs haven't seemed to hold for too long after they are made, however.
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
Thanks 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.
[TABLE="align: center"]
[TR]
[TD="align: center"] Daily TSP Funds Return
[TR]
[TD="align: right"] [/TD]
[/TR]
[/TABLE]
[/TD]
[TD][/TD]
[TD="align: center"]
[/TR]
[/TABLE]
The Fed did not raise rates and said they see rates staying zero 0% through 2022. They keep buying bonds, targeting $80 billion a month in Treasurys and $40 billion in mortgage-backed securities. So, the Fed's game continues to be easy money, and they basically told investors they have their backs. It's sounds bullish for stocks but combined with the government continuing plans to throw trillions at every problem despite the suffocating debt, the free market economy seems to be a thing of the past. I suppose in the short term it's a good thing.
The day started out like Tuesday with losses early, a low hit in early trading, followed by a midday rebound, but things got very choppy after the Fed's policy statement and there was some selling into the close again. For the second day we saw the Nasdaq 100 large cap tech index move to new all-time highs, while small caps (IWM) seemed to be the index investors sold to buy those names like Apple, Amazon, and Microsoft.
Stocks are obviously quite extended and overbought given what they've done over the last few months, but it's tough to tell if we're just seeing another 2 - 3 day pullback, or if something more meaningful is about to happen on the downside. Our intermediate-term indicators do show some weakness and we knew that we had to get a pause at some point. That seems to have already started in the small caps and S&P 500, but because of how fast those indicators improved since the lows, there's a good chance that the pullbacks will remain muted. That said, even a 10 - 15% correction would look like a small blip on the charts, but it wouldn't be fun to lose that in your account.
I am still concerned about black swan events in the coming months leading up to the election. There seems to be a bigger push lately in the news over another wave of the coronavirus manifesting. Can we see a repeat of the prior panic? Probably not of the same magnitude, but they're saying with the huge crowds we've seen at the protests all over the country, and Memorial Day gatherings, apparently it has a catalyst.
The S&P 500 (C-fund) slipped a half of a percent yesterday, a day that saw the Fed give the market pretty much everything it may have wanted to hear, so I was a little surprised that the initial rally after the Fed statement yesterday didn't hold into the close. Perhaps we're seeing a "sell the news" reaction to the rumor that every has been buying recently. That is, that the Fed has the market's back.
The DWCPF (S-fund) pulled back sharply for a second straight day, and that was just about enough to fill the open gap created by the the jobs report last Friday. It is still well up into the top of the large rising trading channel, with a lot of room below, but the 200-day EMA and SMAs are somewhere in between the top and bottom of that channel and could act as support on anymore downside action.
The EFA (I-fund) held up rather well, and once again...
... a sell-off in the dollar helped. The open gap that we've been watching is getting close to being filled.
The Dow Transportation Index was down 2.5% as it fell through its short-term rising trading channel (blue) but that 9500 area will surely try to act as support. Either that or a very weak open will gap it down below that support.
The BND (F-fund) had a huge day and Fed days tend to create big moves in the bond market. We saw new highs by the close after having broken down last week. New highs haven't seemed to hold for too long after they are made, however.
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
Thanks 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.
