Stocks are in melt-up mode at this point as the A-I hype seems to be blooming right before our eyes. As irrational as the stock market can be, there's nothing like a bubble that that can put things over the top - pardon the "top" pun, and look past valuations. The Dow gained 367-points with the top three weighted stocks in the average, UnitedHealth, Microsoft, and Goldman Sachs, all up between 3% and 4% on the day, helping it lead the way. Yields slipped sending bonds and the F-fund up slightly.
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Retail sales came in lighter than expected but that was no consequence to market that seems to be looking forward to something, and looking past the Fed who is still raising interest rates as there is still a 99.8% chance of another rate hike next week baked in.
I remember while the dot com bubble was brewing, I was all in on taking on risk. Yes, it eventually burst but the internet driven rally lasted for years. There was a lot of volatility back then, something we haven't seem much of yet during this year's rally, which could be the start of an A-I driven bubble, and who knows - maybe this one could last for years as well?
I also remember at some point I started to short some of those bloated tech stocks that had gotten parabolic back in the late 1990's, but that didn't always work out well because bubbles are irrational and prices and valuations don't seem to matter. Speculators were betting on potential back then, not value.
I'd short a stock like Amazon during that bubble, a company that was posting losses each quarter for years back then, yet the stock never seemed to go down. I didn't have the foresight to see what it was eventually to become, but others did. So now, as much as I am skeptical of the current market action, I do understand what could be happening if A-I can have the impact on the world as many think is possible.
Other than their Fast Money show, I noticed that CNBC is having fewer bearish guests during the trading day, and that could either be because the station likes to appear to be on the side that's winning, or they are having a difficult time finding bears who are willing to go on TV and admit it at this point. Either way it's another possible sign of euphoria. If your Uber driver or hair dresser starts giving you A-I stock tips, you'll know for sure.
Will things change once earnings start to roll out? After the Fed's probably rate hike next week? Will be something as simple as the more negative August and September historical seasonality records?
The bottom line is the action seems unsustainable, but it can feel like that a long time before something eventually changes it. You would think that dramatically higher interest rates (compared to prior years) and a Fed that is reducing their balance sheet would do it, but apparently that's not enough whether it's the A-I buzz, or just the relief that high inflation may be a thing of the past.
Microsoft was one of the big winners yesterday as they talk optimistically about their A-I future, and priced one of their related services. It was MSFT's 4% gain and new high yesterday that led the Dow, the Nasdaq, and the S&P 500 to the big gains. Interestingly, other FANG leaders like Apple was flat on the day while Amazon and Alphabet (Google) were down, but the small cap stocks are also seeing the opportunities that A-I may bring, and also those small regional bank stocks that are in the S-fund are starting to break out, although KRE is still down 22% for the year.
At this point any talk of this being a bear market rally or that the October lows are going to be tested are behind us, but with small caps soaring, Transports up big, tech working, banks coming back strong, you name it, there is a glass half empty way to look at this. That is, when everything looks good and everything is acting well, then you have to wonder what good news isn't already priced in, and that's when you can get a meaningful pullback. Maybe not another bear market, but something to cleanse the overbought, overly bullish and optimistic, with stocks getting priced to perfection - especially in front of earnings season.
Some big names like Tesla, Netflix, Goldman Sachs, and IBM start to report today so earnings season is on for the next few weeks, and with the Fed's OMC meeting next week, these could make or break this rally.
The S&P 500 (C-fund) is in high flyer mode and has been since the March lows. There was some sideways consolidation in April and May but its been fairly one sided since, unlike the volatility coming off the October 2022 lows, and into the end of the year. The rubber band is stretching thin and may be starting to fray. The index is now more than 400-points above its 200-day EMA. That can happen but eventually it will snap back and the bears who have been waiting for an opportunity to buy, may actually get one.
DWCPF (S-fund) posted yet another 1% rally as it too stretches further above its moving averages, the larger trading channel, and closer to the top of its more steep blue trading channel. Great action and the market loves to push things to frustrate the underinvested in a bull market as much as possible, and right now it is doing a good job of that. The question for the bulls is how much longer can you hold while watching all of that fraying in the rubber band. The answer? Longer than we probably expect.
EFA (I-fund) is hanging around its recent highs while the dollar (UUP) hangs around the recent and prior lows. These will likely continue to move in opposite directions as each may be extended in their own way.
BND (F-fund) was up big early but faded and closed near the lows despite tacking on a modest gain. 73 looks like it could be a test as it approaches the top of its descending trading channel. There are meaningful open gaps both above and below, but to fill the one above at this point, it will have to get above the top of that channel.
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.
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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Retail sales came in lighter than expected but that was no consequence to market that seems to be looking forward to something, and looking past the Fed who is still raising interest rates as there is still a 99.8% chance of another rate hike next week baked in.
I remember while the dot com bubble was brewing, I was all in on taking on risk. Yes, it eventually burst but the internet driven rally lasted for years. There was a lot of volatility back then, something we haven't seem much of yet during this year's rally, which could be the start of an A-I driven bubble, and who knows - maybe this one could last for years as well?
I also remember at some point I started to short some of those bloated tech stocks that had gotten parabolic back in the late 1990's, but that didn't always work out well because bubbles are irrational and prices and valuations don't seem to matter. Speculators were betting on potential back then, not value.
I'd short a stock like Amazon during that bubble, a company that was posting losses each quarter for years back then, yet the stock never seemed to go down. I didn't have the foresight to see what it was eventually to become, but others did. So now, as much as I am skeptical of the current market action, I do understand what could be happening if A-I can have the impact on the world as many think is possible.
Other than their Fast Money show, I noticed that CNBC is having fewer bearish guests during the trading day, and that could either be because the station likes to appear to be on the side that's winning, or they are having a difficult time finding bears who are willing to go on TV and admit it at this point. Either way it's another possible sign of euphoria. If your Uber driver or hair dresser starts giving you A-I stock tips, you'll know for sure.
Will things change once earnings start to roll out? After the Fed's probably rate hike next week? Will be something as simple as the more negative August and September historical seasonality records?
The bottom line is the action seems unsustainable, but it can feel like that a long time before something eventually changes it. You would think that dramatically higher interest rates (compared to prior years) and a Fed that is reducing their balance sheet would do it, but apparently that's not enough whether it's the A-I buzz, or just the relief that high inflation may be a thing of the past.
Microsoft was one of the big winners yesterday as they talk optimistically about their A-I future, and priced one of their related services. It was MSFT's 4% gain and new high yesterday that led the Dow, the Nasdaq, and the S&P 500 to the big gains. Interestingly, other FANG leaders like Apple was flat on the day while Amazon and Alphabet (Google) were down, but the small cap stocks are also seeing the opportunities that A-I may bring, and also those small regional bank stocks that are in the S-fund are starting to break out, although KRE is still down 22% for the year.
At this point any talk of this being a bear market rally or that the October lows are going to be tested are behind us, but with small caps soaring, Transports up big, tech working, banks coming back strong, you name it, there is a glass half empty way to look at this. That is, when everything looks good and everything is acting well, then you have to wonder what good news isn't already priced in, and that's when you can get a meaningful pullback. Maybe not another bear market, but something to cleanse the overbought, overly bullish and optimistic, with stocks getting priced to perfection - especially in front of earnings season.
Some big names like Tesla, Netflix, Goldman Sachs, and IBM start to report today so earnings season is on for the next few weeks, and with the Fed's OMC meeting next week, these could make or break this rally.
The S&P 500 (C-fund) is in high flyer mode and has been since the March lows. There was some sideways consolidation in April and May but its been fairly one sided since, unlike the volatility coming off the October 2022 lows, and into the end of the year. The rubber band is stretching thin and may be starting to fray. The index is now more than 400-points above its 200-day EMA. That can happen but eventually it will snap back and the bears who have been waiting for an opportunity to buy, may actually get one.
DWCPF (S-fund) posted yet another 1% rally as it too stretches further above its moving averages, the larger trading channel, and closer to the top of its more steep blue trading channel. Great action and the market loves to push things to frustrate the underinvested in a bull market as much as possible, and right now it is doing a good job of that. The question for the bulls is how much longer can you hold while watching all of that fraying in the rubber band. The answer? Longer than we probably expect.
EFA (I-fund) is hanging around its recent highs while the dollar (UUP) hangs around the recent and prior lows. These will likely continue to move in opposite directions as each may be extended in their own way.
BND (F-fund) was up big early but faded and closed near the lows despite tacking on a modest gain. 73 looks like it could be a test as it approaches the top of its descending trading channel. There are meaningful open gaps both above and below, but to fill the one above at this point, it will have to get above the top of that channel.
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.
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.
