Stocks once again chopped around between gains and losses on Tuesday, closing weakly and near the lows of the day driven by some Fed talk, which we'll go over below. The Dow lost 401-points taking the brunt of the losses. The broader indices did much better with small caps actually up few ticks. The dollar and bond yields rallied sharply which put a lot of pressure on the I-fund and the F-fund.
[TABLE="align: center"]
[TR]
[TD="align: center"]
[/TD]
[TD][/TD]
[TD="width: 338, align: center"] Daily TSP Funds Return
[TABLE="align: center"]
[TR]
[TD="align: right"] [/TD]
[/TR]
[/TABLE]
[/TD]
[/TR]
[/TABLE]
OK, last day. I was on the road for most of Tuesday and not only did I not get time to write up my normal commentary, but I also didn't get much input to what happened during the day's trading, although I kept an eye on the indices here and there to get a feel for the action, which obviously turned out to be on the bearish side.
When I got home I did notice a big jump in the dollar and bond yields, and a steep drop in bond prices, and I see it was because of some hawkish statement from the Fed about staying aggressive on fighting inflation. That means continuing to raise interest rates, which pushed yields up, pushed bond prices down, and stocks basically went down in sympathy with inflation being the nemesis of consumers. The Fed's action may continue to hinder the economy - which will eventually lower yields so I think it was just a temporary knee-jerk reaction - for bonds anyway.
The stock market is still in the battle between the bulls trying to cement in a bottom, and the bears who still believe this is just a bear market rally.
The S&P 500 (C-fund) is testing some potential support after backing off from the overhead resistance. It probably didn't matter what the news was, this new month, new direction thing is not uncommon and the market may have used any excuse to pause after last week's big rally.
The move in the dollar changed the direction here as well after successfully testing the 50-day EMA again, and holding. Can it continue to bounce to break through that wedge formation, the way it broke through the downtrend in May?
The Yield on the 10-year Treasury jumped back above its 100-day EMA after the Fed's hawkish rhetoric, but look where it found resistance - at the neckline of the head and shoulders pattern. That's typical. We did mention that open gap near 2.9% being a possible overhead rebound target, but the neckline could act as resistance here as well so we'll see how much of a draw that gap becomes.
On the flip side bond prices tanked and technically there was a little more damage done here as it fell below the neckline of its inverted head and shoulders pattern. Again the open gap and the 50-day EMA may be the target here, but one statement may not be enough to change a trend. Bonds were fairly flat when the futures opened Tuesday night.
On Friday we'll get the July jobs report. Estimates are looking for a gain of 250,000 jobs and an unemployment rate of 3.6%. Beat or miss, that should certainly keep the interest rate debate going.
Thanks for reading. I appreciate it. We'll see you back here tomorrow where I will be back on my normal schedule.
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.
[TABLE="align: center"]
[TR]
[TD="align: center"]
[TD][/TD]
[TD="width: 338, align: center"] Daily TSP Funds Return
[TR]
[TD="align: right"] [/TD]
[/TR]
[/TABLE]
[/TD]
[/TR]
[/TABLE]
OK, last day. I was on the road for most of Tuesday and not only did I not get time to write up my normal commentary, but I also didn't get much input to what happened during the day's trading, although I kept an eye on the indices here and there to get a feel for the action, which obviously turned out to be on the bearish side.
When I got home I did notice a big jump in the dollar and bond yields, and a steep drop in bond prices, and I see it was because of some hawkish statement from the Fed about staying aggressive on fighting inflation. That means continuing to raise interest rates, which pushed yields up, pushed bond prices down, and stocks basically went down in sympathy with inflation being the nemesis of consumers. The Fed's action may continue to hinder the economy - which will eventually lower yields so I think it was just a temporary knee-jerk reaction - for bonds anyway.
The stock market is still in the battle between the bulls trying to cement in a bottom, and the bears who still believe this is just a bear market rally.
The S&P 500 (C-fund) is testing some potential support after backing off from the overhead resistance. It probably didn't matter what the news was, this new month, new direction thing is not uncommon and the market may have used any excuse to pause after last week's big rally.
The move in the dollar changed the direction here as well after successfully testing the 50-day EMA again, and holding. Can it continue to bounce to break through that wedge formation, the way it broke through the downtrend in May?
The Yield on the 10-year Treasury jumped back above its 100-day EMA after the Fed's hawkish rhetoric, but look where it found resistance - at the neckline of the head and shoulders pattern. That's typical. We did mention that open gap near 2.9% being a possible overhead rebound target, but the neckline could act as resistance here as well so we'll see how much of a draw that gap becomes.
On the flip side bond prices tanked and technically there was a little more damage done here as it fell below the neckline of its inverted head and shoulders pattern. Again the open gap and the 50-day EMA may be the target here, but one statement may not be enough to change a trend. Bonds were fairly flat when the futures opened Tuesday night.
On Friday we'll get the July jobs report. Estimates are looking for a gain of 250,000 jobs and an unemployment rate of 3.6%. Beat or miss, that should certainly keep the interest rate debate going.
Thanks for reading. I appreciate it. We'll see you back here tomorrow where I will be back on my normal schedule.
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.
