Stocks started the new week with a big rally with the help of some inflows for the new month and new quarter. The Dow gained 765-points and we saw gains of near 2.5% hit most of the indices. What also helped yesterday was another meaningful decline in the 10-year yield and the dollar with the latter pumping up commodities. Oil was up almost $4 a barrel, while gold and silver skyrocketed.
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A weaker than expected ISM Manufacturing report helped take the morning rally to another level as weak data is now good news as it could help push the Fed off the rate hiking express train.
Yesterday, wasn't the 1st of October but it was the first trading day of the month and the first trading day of the 4th quarter, and you can see in the seasonality chart that the first trading day in October tends to be very good. But the stronger period of October would be the middle part of the month so we'll see if that means this week might get sluggish again before it gets better next week.
Chart provided courtesy of www.sentimentrader.com
We saw yields blast off early last week before finally reversing and pulling back. Yesterday saw more downside but the 10-year yield closed well off the low and just back above that rising support line, so the rising trend is technically still intact.
The dollar also pulled back sending prices higher in stocks, and particularly commodities, but it too is now testing some key support, so can the pullback continue, or is it ready to bounce back?
By the way, the 2-year / 10-year yield curve is still very much inverted with the 2-year still paying more than 4% while the 10-year is at 3.68%.
Yesterday's rebound sure turned the TV financial pundits bullish, and perhaps we will get some kind of bear market rally here. But the Fed is still raising interest rates. They are still in Quantitative Tightening mode - selling bonds, and we have earnings season coming up quickly and we may start to see what the economic hiccup has done to earnings and thus the impact of valuations.
Yesterday's gain was not the first time that we saw a rally since the August highs. There was a nice 4-day rally in early September, and maybe that's what we'll get here, but other than that, selling every one or two day rally was the correct play. Eventually that streak will end, but until it does...
We'll get the September jobs report on Friday morning and the estimates are looking for a gain of about 250,000 jobs, and an unemployment rate of 3.7%. Not exactly recessionary numbers but as I mentioned yesterday, we got a second straight month of negative GDP so is the weaker economic data lagging, or did the jobs market survive the economic hiccup?
The chart of the S&P 500 (C-fund) has a lot going on and maybe, just maybe Friday's spike in volume will trigger a meaningful bounce, if yesterday's gains wasn't a one day wonder. But I see a flag formation in a downtrend so the bears may be lurking closely. There's a lot of resistance in the area so if it can get above 3750, it may have a lot of room overhead, but getting above that resistance may not be all that easy.
The DWCPF (S-fund / small caps) ran back up to the top of its bearish looking flag. So far the bulls have done a good job of holding in the 1590 area where the chart hit a low in June, but if that fails, and the bear flag may suggest that, the drop could be ugly.
The EFA (I-fund) rallied about 2% and you can see how much the dollar continues to impact this fund. The dollar did fill in one of its open gaps yesterday so if that happens to hold as support, the EFA could reverse back down. But if we are witnessing a change in trend in the dollar, that could change everything. We just don't know yet. Nothing yet has suggested a change in monetary policy so it's tough to call a change in trend.
The BND (bonds / F-fund) rebounded strongly with yields falling again. We knew a relief rally was likely due here but the chart shows that BND backed off after it hit resistance, and that created a negative reversal day. Today's reaction to that reversal will be very telling.
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. 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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A weaker than expected ISM Manufacturing report helped take the morning rally to another level as weak data is now good news as it could help push the Fed off the rate hiking express train.
Yesterday, wasn't the 1st of October but it was the first trading day of the month and the first trading day of the 4th quarter, and you can see in the seasonality chart that the first trading day in October tends to be very good. But the stronger period of October would be the middle part of the month so we'll see if that means this week might get sluggish again before it gets better next week.
Chart provided courtesy of www.sentimentrader.com
We saw yields blast off early last week before finally reversing and pulling back. Yesterday saw more downside but the 10-year yield closed well off the low and just back above that rising support line, so the rising trend is technically still intact.
The dollar also pulled back sending prices higher in stocks, and particularly commodities, but it too is now testing some key support, so can the pullback continue, or is it ready to bounce back?
By the way, the 2-year / 10-year yield curve is still very much inverted with the 2-year still paying more than 4% while the 10-year is at 3.68%.
Yesterday's rebound sure turned the TV financial pundits bullish, and perhaps we will get some kind of bear market rally here. But the Fed is still raising interest rates. They are still in Quantitative Tightening mode - selling bonds, and we have earnings season coming up quickly and we may start to see what the economic hiccup has done to earnings and thus the impact of valuations.
Yesterday's gain was not the first time that we saw a rally since the August highs. There was a nice 4-day rally in early September, and maybe that's what we'll get here, but other than that, selling every one or two day rally was the correct play. Eventually that streak will end, but until it does...
We'll get the September jobs report on Friday morning and the estimates are looking for a gain of about 250,000 jobs, and an unemployment rate of 3.7%. Not exactly recessionary numbers but as I mentioned yesterday, we got a second straight month of negative GDP so is the weaker economic data lagging, or did the jobs market survive the economic hiccup?
The chart of the S&P 500 (C-fund) has a lot going on and maybe, just maybe Friday's spike in volume will trigger a meaningful bounce, if yesterday's gains wasn't a one day wonder. But I see a flag formation in a downtrend so the bears may be lurking closely. There's a lot of resistance in the area so if it can get above 3750, it may have a lot of room overhead, but getting above that resistance may not be all that easy.
The DWCPF (S-fund / small caps) ran back up to the top of its bearish looking flag. So far the bulls have done a good job of holding in the 1590 area where the chart hit a low in June, but if that fails, and the bear flag may suggest that, the drop could be ugly.
The EFA (I-fund) rallied about 2% and you can see how much the dollar continues to impact this fund. The dollar did fill in one of its open gaps yesterday so if that happens to hold as support, the EFA could reverse back down. But if we are witnessing a change in trend in the dollar, that could change everything. We just don't know yet. Nothing yet has suggested a change in monetary policy so it's tough to call a change in trend.
The BND (bonds / F-fund) rebounded strongly with yields falling again. We knew a relief rally was likely due here but the chart shows that BND backed off after it hit resistance, and that created a negative reversal day. Today's reaction to that reversal will be very telling.
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. 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.
