The S&P 500 broke a 5-day losing streak with a strong gain yesterday, and it had been the first time that the first five trading days in December were negative in decades. This bullish action precedes the start of a string of some of the more important economic data reports that we will get in the coming days, and the last before the end of the year; it's the PPI, CPI, and FOMC meeting. Yesterday was a choppy session after an early rally. The Dow gained an impressive 184-points, but the indices had a difficult time getting above the morning highs.
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The PPI - Producer Price Index comes out this morning before the opening bell as most of you know by now. It's not usually the most important data in the world, but we haven't had an inflation problem like we've had in 2022 for a long time. And with the market hanging on the release of every inflationary data point, this one could trigger a reaction. The CPI that we get next Tuesday will be even more important, but the PPI may set the tone. Then of course we will get the Fed's decision on interest rates on Wednesday and the world is widely anticipating a hike of 0.50%. Next week also happens to be one of those quadruple witching expiration weeks, so it could be a wild one.
The weekly initial jobless claims came in higher than expected yesterday and that may have been part of the catalyst for a little buying as it suggests some possible weakness in the jobs market. Another reason could have been leaked or rumored Producer Price data. I know that's conspiratorial, but how many out there still think this game is a fair one?
Another reason for the rally yesterday could be more sinister, and as you know, I don't trust too much of what I hear or see, so if the rally wasn't because of the jobless claims or leaked data, then perhaps it was one of those moves to get us little guys to lean the wrong way before the Price data and rate hike are announced.
Looking at a 2-day chart of the S&P 500 shows that yesterday's action peaked in the first hour of trading. While that doesn't seem like a good trending day with lower highs and lower lower during the course of the day, that action actually created a small bull flag on the 5-minute chart. That "could" suggest that the next move will be a breakout to the upside with a chance of a move back over 4000. It doesn't have to close there but the bull flag just suggests that at some point we could see a 30 - 50 point move up above the flag. That said, I mentioned yesterday that flag formations haven't been working that well this year.
The weakness in the dollar may be what is helping prices and it is really testing that 200-day moving average (orange) right now. The first bounce ran out of steam but if it does bounced again I would expect stocks to struggle. If this breaks below the average we could get a nice rally in the stock market. On this chart, the bear flag did work as it broke down as we would normally expect.
Here's a reminder that the 30-year seasonality chart for December gets a little shaky around the 9th and somewhere between the 16th and the 20th the real Santa Claus rally typically kicks in. That's typically, not definitely.
Chart provided courtesy of www.sentimentrader.com
The S&P 500 (C-fund) got a bounce off the 50-day EMA but it remains below a lot of resistance areas. The PPI, CPI, and Fed could certainly change that with some kind of gap up moves as we've seen before, but the downside is possible as well with that large gap still open below. I mentioned the crossover in the PMO indicator yesterday, and what I did not mention, but have before, is that sometimes we see very short-term oversold bounces right after an initial crossover, but the intermediate-term still gets the warning flag. That would have been a much more impressive statement if I actually said it in yesterday's commentary.
The DWCPF (S-fund) was up nicely yesterday but it found some resistance at the 20 and 50-day EMAs, and the old support line, which can turn into resistance. The open gaps are open above and below and with next week very likely being volatile, I would think one - or both, will get filled.
The EFA (I-fund) was up but even with the dollar down it lagged the US stocks funds.
BND (bonds / F-fund) was down but this remains in the uptrend with support getting stronger along the way. I might even consider getting into some F-fund if this falls to 73 - 72.
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. Have a great weekend!
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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The PPI - Producer Price Index comes out this morning before the opening bell as most of you know by now. It's not usually the most important data in the world, but we haven't had an inflation problem like we've had in 2022 for a long time. And with the market hanging on the release of every inflationary data point, this one could trigger a reaction. The CPI that we get next Tuesday will be even more important, but the PPI may set the tone. Then of course we will get the Fed's decision on interest rates on Wednesday and the world is widely anticipating a hike of 0.50%. Next week also happens to be one of those quadruple witching expiration weeks, so it could be a wild one.
The weekly initial jobless claims came in higher than expected yesterday and that may have been part of the catalyst for a little buying as it suggests some possible weakness in the jobs market. Another reason could have been leaked or rumored Producer Price data. I know that's conspiratorial, but how many out there still think this game is a fair one?
Another reason for the rally yesterday could be more sinister, and as you know, I don't trust too much of what I hear or see, so if the rally wasn't because of the jobless claims or leaked data, then perhaps it was one of those moves to get us little guys to lean the wrong way before the Price data and rate hike are announced.
Looking at a 2-day chart of the S&P 500 shows that yesterday's action peaked in the first hour of trading. While that doesn't seem like a good trending day with lower highs and lower lower during the course of the day, that action actually created a small bull flag on the 5-minute chart. That "could" suggest that the next move will be a breakout to the upside with a chance of a move back over 4000. It doesn't have to close there but the bull flag just suggests that at some point we could see a 30 - 50 point move up above the flag. That said, I mentioned yesterday that flag formations haven't been working that well this year.
The weakness in the dollar may be what is helping prices and it is really testing that 200-day moving average (orange) right now. The first bounce ran out of steam but if it does bounced again I would expect stocks to struggle. If this breaks below the average we could get a nice rally in the stock market. On this chart, the bear flag did work as it broke down as we would normally expect.
Here's a reminder that the 30-year seasonality chart for December gets a little shaky around the 9th and somewhere between the 16th and the 20th the real Santa Claus rally typically kicks in. That's typically, not definitely.
Chart provided courtesy of www.sentimentrader.com
The S&P 500 (C-fund) got a bounce off the 50-day EMA but it remains below a lot of resistance areas. The PPI, CPI, and Fed could certainly change that with some kind of gap up moves as we've seen before, but the downside is possible as well with that large gap still open below. I mentioned the crossover in the PMO indicator yesterday, and what I did not mention, but have before, is that sometimes we see very short-term oversold bounces right after an initial crossover, but the intermediate-term still gets the warning flag. That would have been a much more impressive statement if I actually said it in yesterday's commentary.
The DWCPF (S-fund) was up nicely yesterday but it found some resistance at the 20 and 50-day EMAs, and the old support line, which can turn into resistance. The open gaps are open above and below and with next week very likely being volatile, I would think one - or both, will get filled.
The EFA (I-fund) was up but even with the dollar down it lagged the US stocks funds.
BND (bonds / F-fund) was down but this remains in the uptrend with support getting stronger along the way. I might even consider getting into some F-fund if this falls to 73 - 72.
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. Have a great weekend!
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.
