Stocks were mostly positive to start the new week as traders and investors position themselves for tomorrow important CPI report, and we get closer to earnings season. After the weaker than expected jobs report on Friday, there is optimism that the CPI will show inflation sliding down closer to the Fed's target area of 2%. The Dow gained over 200-points on the day and small caps led with another big rally. Bonds rallied as yields eased off of the recent highs, but the 10-year remains above 4%.
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After an initial morning rally, the S&P 500 and Nasdaq came back down into negative territory later in the day, but a push higher in the final few minutes of trading before the closing bell put them back in positive territory, so the dip buying off last week's losses was lukewarm in those big cap indices. The Dow, and especially the small caps (S-fund), were a different story as they did quite well, which is interesting since one is a narrow 30 stock index and the other is a broad 4500 stock index (DWCPF.)
I got the bearish talk out of the way yesterday with all of the roadblocks that the stock market may be facing. But one of the best indicators for what is happening now is... what is happening now, and clearly the market is remaining sticky to the upside.
Many money managers have been lagging this market because of its resilience in the face of all the negatives out there, and perhaps that is why stocks remain buoyant. The buoyancy may not last forever, but when you have these investors and money managers lagging, you get the chasing and the quick dip buyers and that could last until... it doesn't.
So yes, looking out weeks or months, it's pretty obvious that there are headwinds, and the question is how much of that is priced in, whether the higher interest rates, reduced balance sheet, yada, yada, yada (see Monday's commentary for more on these negatives.)
Here's an example of the suspicion from market analysts. This is the 2023 end of year S&P 500 targets from a recent CNBC Market Strategists Survey. The average and mean end of year estimate is about 4250. Well, the S&P 500 closed yesterday at 4410.
Either analysts will be raising their targets or the market could be negative over the second half of the year, according to their analysis. As pessimistic as I often sound, I would lean toward this data to mean analysts are too negative and that could mean seeing more chasing into the end of the year -- despite all of the potential headwinds. I said "lean toward" because these analysts predictions are based on fundamentals where I look more at the technical's and indicators, and the two could be telling different stories. I also like to look at things from a contrarian viewpoint and when most are bearish, it often tends to be bullish for stocks.
Of course short term sentiment type of indicators had gotten very bullish lately from investors so it could be a short-term wash. And, looking out over the last year and a half, the recently strong small caps have been in a range and they are heading toward the top of that range and sentiment is almost always most bullish when stocks are rising and doing very well. Market peaks don't occur when investors are extremely bearish. They occur when they are overly bullish.
Like the small caps, the economically sensitive Dow Transportation Index is also flying high and it actually poked its head above the top of a one plus year range. The chart looks good and could be primed for a breakout, but we could have said that in August of last year, or in February earlier this year. A breakout here might be telling us something very positive but, specific to this chart, we have to be cognizant of the fact that UPS working may be going on strike by the end of this month, and they are a big part of this index.
I wish I was more bullish, especially on day like yesterday, but I'd prefer to buy fear, not euphoria - for better or worse.
We will get the CPI report on Wednesday before the opening bell, and being the last one before the Fed's July FOMC meeting, it could be more of a market mover than the jobs reports we just had.
The S&P 500 (C-fund) was a little sluggish yesterday despite the modest gain as all of its gain came in the final couple of minutes of trading after the morning rally failed. It's sitting in the middle of its rising parallel trading channel (blue) with some resistance overhead but also a lot of support below as well, and that could mean more chopping around in this area with the bulls having the advantage because of the positive trend. It wouldn't take too much for the bears to take control again, but that is probably often the case in markets. It's a matter of support holding during pullbacks.
DWCPF (S-fund) knocked the ball out of the park again yesterday as it added onto Friday's big rally. Of course the three day move (from the lows on Thursday to yesterday's highs) only got it back to last Monday's closing price, but that did create a more bullish looking formation called a cup and handle with that triple top.
EFA (I-fund) also posted moderate gains and once again the weakness in the dollar helped. Overhead open gaps make a compelling case for the upside in the short-term, but to me that looks like it is in a new downtrend within that blue descending trading channel.
BND (bonds / F-fund) rebounded after last Thursday's gap down following the ADP employment data. The 10-year yield was down and there is an open gap near 3.95%, but it did manage to close above 4% for a 3rd straight day.
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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After an initial morning rally, the S&P 500 and Nasdaq came back down into negative territory later in the day, but a push higher in the final few minutes of trading before the closing bell put them back in positive territory, so the dip buying off last week's losses was lukewarm in those big cap indices. The Dow, and especially the small caps (S-fund), were a different story as they did quite well, which is interesting since one is a narrow 30 stock index and the other is a broad 4500 stock index (DWCPF.)
I got the bearish talk out of the way yesterday with all of the roadblocks that the stock market may be facing. But one of the best indicators for what is happening now is... what is happening now, and clearly the market is remaining sticky to the upside.
Many money managers have been lagging this market because of its resilience in the face of all the negatives out there, and perhaps that is why stocks remain buoyant. The buoyancy may not last forever, but when you have these investors and money managers lagging, you get the chasing and the quick dip buyers and that could last until... it doesn't.
So yes, looking out weeks or months, it's pretty obvious that there are headwinds, and the question is how much of that is priced in, whether the higher interest rates, reduced balance sheet, yada, yada, yada (see Monday's commentary for more on these negatives.)
Here's an example of the suspicion from market analysts. This is the 2023 end of year S&P 500 targets from a recent CNBC Market Strategists Survey. The average and mean end of year estimate is about 4250. Well, the S&P 500 closed yesterday at 4410.
Either analysts will be raising their targets or the market could be negative over the second half of the year, according to their analysis. As pessimistic as I often sound, I would lean toward this data to mean analysts are too negative and that could mean seeing more chasing into the end of the year -- despite all of the potential headwinds. I said "lean toward" because these analysts predictions are based on fundamentals where I look more at the technical's and indicators, and the two could be telling different stories. I also like to look at things from a contrarian viewpoint and when most are bearish, it often tends to be bullish for stocks.
Of course short term sentiment type of indicators had gotten very bullish lately from investors so it could be a short-term wash. And, looking out over the last year and a half, the recently strong small caps have been in a range and they are heading toward the top of that range and sentiment is almost always most bullish when stocks are rising and doing very well. Market peaks don't occur when investors are extremely bearish. They occur when they are overly bullish.
Like the small caps, the economically sensitive Dow Transportation Index is also flying high and it actually poked its head above the top of a one plus year range. The chart looks good and could be primed for a breakout, but we could have said that in August of last year, or in February earlier this year. A breakout here might be telling us something very positive but, specific to this chart, we have to be cognizant of the fact that UPS working may be going on strike by the end of this month, and they are a big part of this index.
I wish I was more bullish, especially on day like yesterday, but I'd prefer to buy fear, not euphoria - for better or worse.
We will get the CPI report on Wednesday before the opening bell, and being the last one before the Fed's July FOMC meeting, it could be more of a market mover than the jobs reports we just had.
The S&P 500 (C-fund) was a little sluggish yesterday despite the modest gain as all of its gain came in the final couple of minutes of trading after the morning rally failed. It's sitting in the middle of its rising parallel trading channel (blue) with some resistance overhead but also a lot of support below as well, and that could mean more chopping around in this area with the bulls having the advantage because of the positive trend. It wouldn't take too much for the bears to take control again, but that is probably often the case in markets. It's a matter of support holding during pullbacks.
DWCPF (S-fund) knocked the ball out of the park again yesterday as it added onto Friday's big rally. Of course the three day move (from the lows on Thursday to yesterday's highs) only got it back to last Monday's closing price, but that did create a more bullish looking formation called a cup and handle with that triple top.
EFA (I-fund) also posted moderate gains and once again the weakness in the dollar helped. Overhead open gaps make a compelling case for the upside in the short-term, but to me that looks like it is in a new downtrend within that blue descending trading channel.
BND (bonds / F-fund) rebounded after last Thursday's gap down following the ADP employment data. The 10-year yield was down and there is an open gap near 3.95%, but it did manage to close above 4% for a 3rd straight day.
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.
