Stocks were mostly lower yesterday, although the Dow posted a moderate gain despite 16 of the index's 30 stocks being down on the day. Seven of the eight heaviest weighted companies in the Dow were up, which helped give it the gain on the day. Otherwise, the broader indices were lower including the tech sector, small caps, the I-fund, the Transports, and Apple, explaining why the market breadth was about 2 to 1 in favor of decliners over advancers on both the NYSE and the Nasdaq.
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The pullback continued despite a move lower in yields. The dollar was up creating a headwind for stocks, and we are seeing some breakdowns and near breakdowns as key support in the stock index charts get tested this week.
The Yield on the 10-year Treasury has stalled at the overhead gap that was filled in the last couple of days, and that is a convenient spot for it to take a break. Now the question is whether it is about to fill the open gap below near 4.2%. If that happens it could help stocks to a little bit of relief, and if it happens to fall below the rising blue support line again, we could be looking at a short term top for yields, which could help stocks stop their bleeding. But the longer term chart may be suggesting something else...
The one year chart shows the double top pullback that the 10-year yield has been experiencing. Generally double tops are only bearish temporarily and the chart can resume its upside move after a brief pullback. That could result in a breakout in the near futures which could be tough on the stock market.
Yields tend to move with the economy. That is, a strong economy justifies higher yields to keep things from getting too hot and keep inflation under control. Oil is also influenced by the economy as a stronger economy usually increased demand, although supply is also a factor. But since both are influenced by the economy, the charts tend to create similar patterns and move in similar directions. Recently oil has lagged the recent big jump in yields so one of these two charts may be out of whack with the 10-year yield near 2022 highs and oil still well off the $130 peaks of 2022.
Yesterday I talked about the indices and stocks that tend to set the tone for the rest of the market and yesterday all three were down - the Dow Transportation Index, the Russell 2000, and Apple. We could probably throw the Nasdaq in there as well, which was down 0.89% yesterday, but that's too close to being part of "the" market.
As goes Apple gave us another big down day with a large gap lower yesterday. The gap could be a target to be filled in the short term, but this is close to looking like a peak. This longer term chart below shows that it has come a long way this year and may need a pause.
I hate to dwell on one stock, but being the biggest company in the US and being a large part of the Dow, S&P 500, and the Nasdaq means it will be tough for those indices to do well if this is floundering.
The issue of China banning iphones for some government agencies could be a short-term blip, or it could get more serious if the ban is expended to other parts of China.
We had an issue with our 3rd party email service yesterday so I apologize if you received any notifications later than expected. They did finally fix things and it seems to be working, so hopefully that problem has been resolved.
Administrative Note: It's time for the 2023 NFL Survivor Pool again. It's a very easy contest to do - just pick one winning team every week and you move on to the next week. As always, it's free. The deadline to register and make your week one pick is the start of the first game this coming Sunday. More information
The S&P 500 (C-fund) was down yesterday, but it closed off its lows again, and the bottom of the breakout candle from August 29 held again - as did the 50-day EMA which, so far means this pullback has been contained. A push down to the blue line, which was the old resistance line, is also something that could be tested before the pullback is done, but we can't rule out the 50-day EMA being the low here. The PMO indicator crossover last week did produce the overbought pullback that we often see, but those pullbacks are also often temporary.
The head and shoulders pattern, which is more noticeable on the S-fund chart down below, is still a bearish set up, but so far so good as far as the technical damage is still contained.
DWCPF (S-fund) is forming the right shoulder of a head and shoulders pattern. These are generally considered bearish patterns, but they are more bearish when they are formed during a down trend. This one is coming on top of the big rally off the March lows and may be a continuation pattern (continuing the upside) as long as the neckline near 1720 continues to hold. The 50-day EMA broke yesterday, so that's at least strike one.
The EFA (I-fund) failed at the 50-day EMA and is now back below a descending resistance line. It's been lagging the other funds because the dollar is in the midst of its longest rally since 2005.
BND (Bonds / F-fund) had a nice day as yields finally pulled back. We talked about the yields above, and their potential direction from here, and this chart will basically move in the opposite direction of that TNX yield chart.
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.
Like what you're seeing on TSP Talk? Why not Tell a Friend about us? We'd really appreciate it, and they may too.
Thanks!
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 pullback continued despite a move lower in yields. The dollar was up creating a headwind for stocks, and we are seeing some breakdowns and near breakdowns as key support in the stock index charts get tested this week.
The Yield on the 10-year Treasury has stalled at the overhead gap that was filled in the last couple of days, and that is a convenient spot for it to take a break. Now the question is whether it is about to fill the open gap below near 4.2%. If that happens it could help stocks to a little bit of relief, and if it happens to fall below the rising blue support line again, we could be looking at a short term top for yields, which could help stocks stop their bleeding. But the longer term chart may be suggesting something else...
The one year chart shows the double top pullback that the 10-year yield has been experiencing. Generally double tops are only bearish temporarily and the chart can resume its upside move after a brief pullback. That could result in a breakout in the near futures which could be tough on the stock market.
Yields tend to move with the economy. That is, a strong economy justifies higher yields to keep things from getting too hot and keep inflation under control. Oil is also influenced by the economy as a stronger economy usually increased demand, although supply is also a factor. But since both are influenced by the economy, the charts tend to create similar patterns and move in similar directions. Recently oil has lagged the recent big jump in yields so one of these two charts may be out of whack with the 10-year yield near 2022 highs and oil still well off the $130 peaks of 2022.
Yesterday I talked about the indices and stocks that tend to set the tone for the rest of the market and yesterday all three were down - the Dow Transportation Index, the Russell 2000, and Apple. We could probably throw the Nasdaq in there as well, which was down 0.89% yesterday, but that's too close to being part of "the" market.
As goes Apple gave us another big down day with a large gap lower yesterday. The gap could be a target to be filled in the short term, but this is close to looking like a peak. This longer term chart below shows that it has come a long way this year and may need a pause.
I hate to dwell on one stock, but being the biggest company in the US and being a large part of the Dow, S&P 500, and the Nasdaq means it will be tough for those indices to do well if this is floundering.
The issue of China banning iphones for some government agencies could be a short-term blip, or it could get more serious if the ban is expended to other parts of China.
We had an issue with our 3rd party email service yesterday so I apologize if you received any notifications later than expected. They did finally fix things and it seems to be working, so hopefully that problem has been resolved.
Administrative Note: It's time for the 2023 NFL Survivor Pool again. It's a very easy contest to do - just pick one winning team every week and you move on to the next week. As always, it's free. The deadline to register and make your week one pick is the start of the first game this coming Sunday. More information
The S&P 500 (C-fund) was down yesterday, but it closed off its lows again, and the bottom of the breakout candle from August 29 held again - as did the 50-day EMA which, so far means this pullback has been contained. A push down to the blue line, which was the old resistance line, is also something that could be tested before the pullback is done, but we can't rule out the 50-day EMA being the low here. The PMO indicator crossover last week did produce the overbought pullback that we often see, but those pullbacks are also often temporary.
The head and shoulders pattern, which is more noticeable on the S-fund chart down below, is still a bearish set up, but so far so good as far as the technical damage is still contained.
DWCPF (S-fund) is forming the right shoulder of a head and shoulders pattern. These are generally considered bearish patterns, but they are more bearish when they are formed during a down trend. This one is coming on top of the big rally off the March lows and may be a continuation pattern (continuing the upside) as long as the neckline near 1720 continues to hold. The 50-day EMA broke yesterday, so that's at least strike one.
The EFA (I-fund) failed at the 50-day EMA and is now back below a descending resistance line. It's been lagging the other funds because the dollar is in the midst of its longest rally since 2005.
BND (Bonds / F-fund) had a nice day as yields finally pulled back. We talked about the yields above, and their potential direction from here, and this chart will basically move in the opposite direction of that TNX yield chart.
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.
Like what you're seeing on TSP Talk? Why not Tell a Friend about us? We'd really appreciate it, and they may too.
Thanks!
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.
