The S&P 500 and Nasdaq made it 7 of 8 positive closes on Friday, taking them both to new all time highs. It took a late move higher to push the Dow from negative to positive territory, and small caps continue to be non-participants in the early summer rally despite a sharp pullback in yields on Friday, caused by a softer than expected jobs report. The jobs data also sent the dollar lower helping the I-fund to a big gain.
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In Friday's commentary I mentioned how we have seen a pattern of these jobs reports beating estimates (the headline number) but also revising prior monthly reports lower. The headline number did beat the 170K to 185K estimates coming in at +206K, but they also reduced May's report from 272K to 218K, or a 54K fewer jobs than reported, so that game continues. The unemployment rate also unexpectedly moved up to 4.1%, and hourly wages came in a tick lower than expected.
The higher than expected headline number did not fool the bond market as yields came falling down on Friday, and the dollar also continued its recent slide off the highs. That combination helped both the F and I-funds to solid gains on Friday.
The question I have is whether the declines in these were just the pre-holiday reversals that we often see before a major holiday? If that's the case, they may both head back up this week.
The rumors of President Biden dropping out of the 2024 presidential race by Monday are still up in the air, and the latest on that, according to NBC news, is that key House and Senate Democrats are planning meetings this week where they're expected to discuss the path forward for President Joe Biden. Biden has insisted that he is still running. The stock market has been apathetic to the story so far, but the VIX (Volatility Index) was actually up sharply on Friday despite the big rally in the S&P 500, so perhaps there is some protection being bought just in case.
I thought the following write up from TommyIV in his Weekly Wrap Up was very interesting, and telling about how bullish investors have become:
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[TD] The average allocation among TSP Talk non-premium AutoTracker members increased in both the C and I-funds this week while decreasing in the G, F, and S-funds. Now over 32%, the average C-fund allocation became the highest among the five after passing the G-fund this week.
But this is still not the most bullish TSP Talk AutoTracker we’ve seen. At the beginning of 2022, the average G-fund allocation was 22.24% and the most popular fund was the S-fund with an average allocation of 37.25%. The S-fund went on to fall 26.26% that year.
Source: TSP Talk Weekly Wrap Up - The C-fund is Now the Most Held TSP Fund
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Remember, extreme sentiment is often a sign that a move is near its end. So, what I took away from that data was that stocks fell sharply after the S-fund was experiencing similar euphoric sentiment in early 2022. The C-fund is not quite at that 2022 S-fund percentage, but it's getting closer.
One of the market leaders continues to teeter near a key make or break area. A failure here would be very disappointing to the bulls. This head and shoulders pattern with a test of the head going on is a legitimate formation and success or failure at least week's highs near the middle of the head could tell us a lot of what happens next for the broader stock market, or at least the economy since big tech seems to have a mind of its own as AI technology continues to get priced into the market.
The price of oil is also teetering near $84, hitting it three times but failing to close above it once last week. As I mentioned last week, stocks have struggled in recent years when oil starts to get above $84 a barrel.
Fed chair Jerome Powell will give his semiannual testimony to the Senate Banking Committee on Tuesday and the House Financial Services Committee on Wednesday so that will certainly be newsworthy. We will also get the June CPI report on Thursday.
The S&P 500 (C-fund) had a healthy two-week consolidation at the end of June and then we got a blast off last week - the pre-holiday week, so trust is an issue. The chart looks great but very extended. Buying the dips here has been working but it is hardly a bargain at these levels. The open gap below 5400 would be a nice pullback target that even the bulls may not mind as there is a lot of support in the area.
The S-fund (DWCPF) has spent a long time doing virtually nothing while the S&P 500 and the Nasdaq have skyrocketing to new highs almost daily. There's a possible bearish flag formation in there, but if it can get above a couple of layers of resistance in the 2020 area, it may have been consolidating long enough to have the strength to make a move to the upside. But are investors interested enough or will they just keeping dumping money into large cap tech?
The EFA (I-fund) had a great week last week and, being a holiday week, can we trust it? The dollar confirmed the move with its own pre-holiday reversal to the downside.
BND (bonds / F-fund) gapped up for a second straight day on Friday. Again, was that a pre-holiday reversal from the late June pullback that will reverse back this week? It wouldn't be a surprise, but we did have some data last week that warranted the strength in bonds.
Thanks so much for reading! We'll see you back here tomorrow.
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
Questions, comments, or issues with today's commentary? We can discuss it in the Forum.
Daily Market Commentary Archives
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.
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="width: 311, align: center"] Daily TSP Funds Return
[TR]
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[/TR]
[/TABLE]
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In Friday's commentary I mentioned how we have seen a pattern of these jobs reports beating estimates (the headline number) but also revising prior monthly reports lower. The headline number did beat the 170K to 185K estimates coming in at +206K, but they also reduced May's report from 272K to 218K, or a 54K fewer jobs than reported, so that game continues. The unemployment rate also unexpectedly moved up to 4.1%, and hourly wages came in a tick lower than expected.
The higher than expected headline number did not fool the bond market as yields came falling down on Friday, and the dollar also continued its recent slide off the highs. That combination helped both the F and I-funds to solid gains on Friday.
The question I have is whether the declines in these were just the pre-holiday reversals that we often see before a major holiday? If that's the case, they may both head back up this week.
The rumors of President Biden dropping out of the 2024 presidential race by Monday are still up in the air, and the latest on that, according to NBC news, is that key House and Senate Democrats are planning meetings this week where they're expected to discuss the path forward for President Joe Biden. Biden has insisted that he is still running. The stock market has been apathetic to the story so far, but the VIX (Volatility Index) was actually up sharply on Friday despite the big rally in the S&P 500, so perhaps there is some protection being bought just in case.
I thought the following write up from TommyIV in his Weekly Wrap Up was very interesting, and telling about how bullish investors have become:
[TABLE="class: outer_border, width: 500, align: center"]
[TR]
[TD] The average allocation among TSP Talk non-premium AutoTracker members increased in both the C and I-funds this week while decreasing in the G, F, and S-funds. Now over 32%, the average C-fund allocation became the highest among the five after passing the G-fund this week.
But this is still not the most bullish TSP Talk AutoTracker we’ve seen. At the beginning of 2022, the average G-fund allocation was 22.24% and the most popular fund was the S-fund with an average allocation of 37.25%. The S-fund went on to fall 26.26% that year.
Source: TSP Talk Weekly Wrap Up - The C-fund is Now the Most Held TSP Fund
[/TD]
[TD]
[/TD]
[/TR]
[/TABLE]
Remember, extreme sentiment is often a sign that a move is near its end. So, what I took away from that data was that stocks fell sharply after the S-fund was experiencing similar euphoric sentiment in early 2022. The C-fund is not quite at that 2022 S-fund percentage, but it's getting closer.
One of the market leaders continues to teeter near a key make or break area. A failure here would be very disappointing to the bulls. This head and shoulders pattern with a test of the head going on is a legitimate formation and success or failure at least week's highs near the middle of the head could tell us a lot of what happens next for the broader stock market, or at least the economy since big tech seems to have a mind of its own as AI technology continues to get priced into the market.
The price of oil is also teetering near $84, hitting it three times but failing to close above it once last week. As I mentioned last week, stocks have struggled in recent years when oil starts to get above $84 a barrel.
Fed chair Jerome Powell will give his semiannual testimony to the Senate Banking Committee on Tuesday and the House Financial Services Committee on Wednesday so that will certainly be newsworthy. We will also get the June CPI report on Thursday.
The S&P 500 (C-fund) had a healthy two-week consolidation at the end of June and then we got a blast off last week - the pre-holiday week, so trust is an issue. The chart looks great but very extended. Buying the dips here has been working but it is hardly a bargain at these levels. The open gap below 5400 would be a nice pullback target that even the bulls may not mind as there is a lot of support in the area.
The S-fund (DWCPF) has spent a long time doing virtually nothing while the S&P 500 and the Nasdaq have skyrocketing to new highs almost daily. There's a possible bearish flag formation in there, but if it can get above a couple of layers of resistance in the 2020 area, it may have been consolidating long enough to have the strength to make a move to the upside. But are investors interested enough or will they just keeping dumping money into large cap tech?
The EFA (I-fund) had a great week last week and, being a holiday week, can we trust it? The dollar confirmed the move with its own pre-holiday reversal to the downside.
BND (bonds / F-fund) gapped up for a second straight day on Friday. Again, was that a pre-holiday reversal from the late June pullback that will reverse back this week? It wouldn't be a surprise, but we did have some data last week that warranted the strength in bonds.
Thanks so much for reading! We'll see you back here tomorrow.
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
Questions, comments, or issues with today's commentary? We can discuss it in the Forum.
Daily Market Commentary Archives
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.
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.
