Stocks opened higher, and closed near the highs, but in between the bears did a little work of their own. However the bulls came away with a much needed victory on Turnaround Tuesday to stop the bleeding after three consecutive awful days for stocks. The Dow gained 1167-points, well short of Monday's 2000+ point loss, but the bulls needed to start somewhere. While the bears may eventually be back to test those lows, the bulls are looking for a sustainable relief rally.
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Yesterday was a classic positive reversal day. That sounds great, but there were two similar moves last week and we saw those large short-term gains evaporate the next day. The lows have to start from somewhere and yesterday was a good start, but this still isn't a "V" bottom type of atmosphere and the bulls need to stay on their toes, even if they can muster up a strong rebound.
The emotional roller-coaster is not likely over and no matter which side of the fence you are on, there will be days like Monday and Tuesday to scare each side. A temporary low is trying to be made but again, small or large, any bounce has a good chance of coming back to test the lows down the road, and that could be in a couple of days, or a couple of weeks.
The uncertainty remains high regarding what this "shelter in place" approach to the coronavirus is going to do to the economy, and what the administration is eventually going to propose to help. They are talking about the possibility of eliminating the payroll tax for a while, but that has other ramifications.
We know the Fed has already had an emergency interest rate cut and they are also planning to cut again at next week's meeting, but the market knows this and may have already priced it in. At this point the thing the stock market has going for it is discounted prices, and investor sentiment that is so bearish that it's tough to imagine who hasn't thrown in the towel already - if they had any desire to sell over the last week or two.
That doesn't make for a great environment for the stock market, but rather a volatile one. For the bulls it could mean a short-term pop to the upside. For the bears it would mean higher prices that can be sold again later. The question is, how long might this play out?
The futures were down more than 1% as I write this on Tuesday evening, so the wild swings were continuing after hours.
The S&P 500 (C-fund) got a big bounce on Tuesday, but being only slightly more than half of Monday's losses, it's not quite as impressive as it sounds. More follow-through upside today would be impressive and could be a green light to those who bailed recently. It's back above that peak volume February 28th low, which I still think was a meaningful day because of that volume.
The price of oil gained over 10% yesterday, a tremendous one day gain, but of course after Monday's carnage it wasn't too surprising to get that big of a snap back rally. If the gap can start getting filled it could bring in more buyers, but from a technical analysis point of view, traders will be worried about the top of that gap acting as resistance.
The DWCPF (S-fund) lagged some yesterday but put in a positive reversal day as well. It remains in an ugly descending trading channel, but it would be difficult for the angle of that decline to be sustained.
The EFA (I-fund) was the leader on the downside for most of this decline when it was unable to make new highs in February like the C and S funds above. The dollar rallied yesterday and if that continues, the I-fund could continue to lag.
The yield on the 10-year Treasury bounced sharply but still remains quite a bit below 1%, which is astonishing. There's another open gap near 0.9%, and whether that acts as resistance is the question.
The AGG (bonds / F-fund) was down sharply on that spike in yield and it looks like a peak may finally be in -- for now. I would look for bond bulls to try to buy again in the 115.50 area on this chart.
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.
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[TD="align: center"] Daily TSP Funds Return
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[TD][/TD]
[TD="align: center"]
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Yesterday was a classic positive reversal day. That sounds great, but there were two similar moves last week and we saw those large short-term gains evaporate the next day. The lows have to start from somewhere and yesterday was a good start, but this still isn't a "V" bottom type of atmosphere and the bulls need to stay on their toes, even if they can muster up a strong rebound.
The emotional roller-coaster is not likely over and no matter which side of the fence you are on, there will be days like Monday and Tuesday to scare each side. A temporary low is trying to be made but again, small or large, any bounce has a good chance of coming back to test the lows down the road, and that could be in a couple of days, or a couple of weeks.
The uncertainty remains high regarding what this "shelter in place" approach to the coronavirus is going to do to the economy, and what the administration is eventually going to propose to help. They are talking about the possibility of eliminating the payroll tax for a while, but that has other ramifications.
We know the Fed has already had an emergency interest rate cut and they are also planning to cut again at next week's meeting, but the market knows this and may have already priced it in. At this point the thing the stock market has going for it is discounted prices, and investor sentiment that is so bearish that it's tough to imagine who hasn't thrown in the towel already - if they had any desire to sell over the last week or two.
That doesn't make for a great environment for the stock market, but rather a volatile one. For the bulls it could mean a short-term pop to the upside. For the bears it would mean higher prices that can be sold again later. The question is, how long might this play out?
The futures were down more than 1% as I write this on Tuesday evening, so the wild swings were continuing after hours.
The S&P 500 (C-fund) got a big bounce on Tuesday, but being only slightly more than half of Monday's losses, it's not quite as impressive as it sounds. More follow-through upside today would be impressive and could be a green light to those who bailed recently. It's back above that peak volume February 28th low, which I still think was a meaningful day because of that volume.
The price of oil gained over 10% yesterday, a tremendous one day gain, but of course after Monday's carnage it wasn't too surprising to get that big of a snap back rally. If the gap can start getting filled it could bring in more buyers, but from a technical analysis point of view, traders will be worried about the top of that gap acting as resistance.
The DWCPF (S-fund) lagged some yesterday but put in a positive reversal day as well. It remains in an ugly descending trading channel, but it would be difficult for the angle of that decline to be sustained.
The EFA (I-fund) was the leader on the downside for most of this decline when it was unable to make new highs in February like the C and S funds above. The dollar rallied yesterday and if that continues, the I-fund could continue to lag.
The yield on the 10-year Treasury bounced sharply but still remains quite a bit below 1%, which is astonishing. There's another open gap near 0.9%, and whether that acts as resistance is the question.
The AGG (bonds / F-fund) was down sharply on that spike in yield and it looks like a peak may finally be in -- for now. I would look for bond bulls to try to buy again in the 115.50 area on this chart.
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.
