It was another day of big swings in the stock market yesterday. We saw a 50+ point gain in the S&P 500 go negative by mid-afternoon before a late rally pushed it back into positive territory where it held onto decent gains. The Dow added 334-points for another big triple digit gain, but there could be a headwind for the Dow today after Disney reported disappointing earnings after the bell yesterday, and was down about 10% after hours.
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I can't help but suspect that the smart money is really trying to make things tricky for us. It feels like they want us to buy, which makes me believe they want to sell the rallies, but they don't know much more than we do about the upcoming election and tomorrow's CPI report results. At least I hope they don't. That would be another story.
We still have a lot of charts that look bearish but perhaps that doesn't mean too much with so much on the line in the near future. The charts have been perky for the last few days but the charts still have some troubling formations. The question is whether the poor formations are hinting toward news that the market won't like, or can the outcomes flip this market into a better technical position and improve those bearish looking charts? That I don't know so I won't get too deep into analysis today.
The 10-year Treasury Yield was down modestly yesterday but once gain it seems like it was the dollar's weakness that stimulated buying. The problem with that is, the dollar chart (UUP) is at the bottom of a bullish flag so we could get some support in this area. That is unless we get some news that helps push it down to fill that open gap down near 29. Which direction may determine the direction of the next meaningful move in the stock market. Reminder: Stocks have recently been moving counter to the direction of the dollar.
The estimates for the CPI is a gain of 0.7%, and for the Core CPI +0.5%. The year over year CPI in September was 8.2% and that may be the benchmark for October's report. The Core CPI, which excludes food and energy - probably the largest hindrance to consumers, was up 6.6% in September.
Being that we are already more than a week into November, the October CPI data is rear-view mirror information, but it helps us understand which way the trend is moving.
The election results could also impact the inflation picture. A gridlocked DC means a decrease in the chances of any large spending bills getting passed. In general, the stock market actually likes economic stimulus, but realizing that the spending that was done during the COVID pandemic was one of the major causes of inflation, it may prefer less spending out of Washington in the coming years.
Here's where the CPI report will be released on Thursday if you want to see some of the nuts and bolts: https://www.bls.gov/cpi/
Admin Note: Friday is Veteran's Day and a Federal Holiday so the TSP will be closed and not processing transactions that day. That means I will be taking the day off as well and won't be posting a commentary on Friday, nor will the premium services be updated.
The S&P 500 (C-fund) did make it over the 50-day EMA yesterday but it had to do it twice after the afternoon sell off took it well below the average, but just briefly. The bear flag remains intact and there are some obstacles overhead, so the question is whether this is signaling bearish news being imminent, or at least a bearish outcome, or if the news will change the look and feel of the chart to something more bullish.
The DWCPF (small caps / S-fund) traded in a wide range yesterday but ended with a modest gain, although it remains below its 50-day EMA. There's the bear flag and overhead resistance, so the small caps have something to prove. If, big if, the CPI comes in softer than expected, the interest rate sensitive small caps could outperform. Of course the opposite is also true - hotter report = underperforming.
The EFA (I-fund) jumped another 1.1% yesterday and that's what you get in the I-fund when stocks are up big in the morning, and the dollar is down. It is now make or break time for the dollar and that bull flag.
BND (bonds / F-fund) was up on a dip in yields but we know the deal with the CPI on deck. Inflationary data will send yields higher and bond prices down. Less inflationary data will send yields lower and bond prices and the F-fund higher.
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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I can't help but suspect that the smart money is really trying to make things tricky for us. It feels like they want us to buy, which makes me believe they want to sell the rallies, but they don't know much more than we do about the upcoming election and tomorrow's CPI report results. At least I hope they don't. That would be another story.
We still have a lot of charts that look bearish but perhaps that doesn't mean too much with so much on the line in the near future. The charts have been perky for the last few days but the charts still have some troubling formations. The question is whether the poor formations are hinting toward news that the market won't like, or can the outcomes flip this market into a better technical position and improve those bearish looking charts? That I don't know so I won't get too deep into analysis today.
The 10-year Treasury Yield was down modestly yesterday but once gain it seems like it was the dollar's weakness that stimulated buying. The problem with that is, the dollar chart (UUP) is at the bottom of a bullish flag so we could get some support in this area. That is unless we get some news that helps push it down to fill that open gap down near 29. Which direction may determine the direction of the next meaningful move in the stock market. Reminder: Stocks have recently been moving counter to the direction of the dollar.
The estimates for the CPI is a gain of 0.7%, and for the Core CPI +0.5%. The year over year CPI in September was 8.2% and that may be the benchmark for October's report. The Core CPI, which excludes food and energy - probably the largest hindrance to consumers, was up 6.6% in September.
Being that we are already more than a week into November, the October CPI data is rear-view mirror information, but it helps us understand which way the trend is moving.
The election results could also impact the inflation picture. A gridlocked DC means a decrease in the chances of any large spending bills getting passed. In general, the stock market actually likes economic stimulus, but realizing that the spending that was done during the COVID pandemic was one of the major causes of inflation, it may prefer less spending out of Washington in the coming years.
Here's where the CPI report will be released on Thursday if you want to see some of the nuts and bolts: https://www.bls.gov/cpi/
Admin Note: Friday is Veteran's Day and a Federal Holiday so the TSP will be closed and not processing transactions that day. That means I will be taking the day off as well and won't be posting a commentary on Friday, nor will the premium services be updated.
The S&P 500 (C-fund) did make it over the 50-day EMA yesterday but it had to do it twice after the afternoon sell off took it well below the average, but just briefly. The bear flag remains intact and there are some obstacles overhead, so the question is whether this is signaling bearish news being imminent, or at least a bearish outcome, or if the news will change the look and feel of the chart to something more bullish.
The DWCPF (small caps / S-fund) traded in a wide range yesterday but ended with a modest gain, although it remains below its 50-day EMA. There's the bear flag and overhead resistance, so the small caps have something to prove. If, big if, the CPI comes in softer than expected, the interest rate sensitive small caps could outperform. Of course the opposite is also true - hotter report = underperforming.
The EFA (I-fund) jumped another 1.1% yesterday and that's what you get in the I-fund when stocks are up big in the morning, and the dollar is down. It is now make or break time for the dollar and that bull flag.
BND (bonds / F-fund) was up on a dip in yields but we know the deal with the CPI on deck. Inflationary data will send yields higher and bond prices down. Less inflationary data will send yields lower and bond prices and the F-fund higher.
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.
