Another positive Monday for the stock market with solid gains across the board and the winning ways are not slowing down, but rather gaining momentum, if anything. The Dow added another 200+ points and the Nasdaq led with big tech having a strong day. Small caps and the I-fund continue to do well as yields and the dollar fall. Even the F-fund posted another gain, so it was a sea of green for the TSP funds.
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The stock market (and the business community) is so dependent on interest rates that everything the Fed says and does is interpreted in how that relates to those interest rates. And every economic data report that comes out is weighed by what the Fed might think about that data.
During the rise in yields in the early fall, stocks were declining for three months. Now we got a couple inflation calming reports and stocks have gone straight up for the last three weeks.
For the S&P 500, yesterday was the 5th straight positive close and the 14th of the last 16 trading days. Before this winning streak the S&P 500 was down 10 of 12 trading days and August and September charts were a sea of red, so it has been all or nothing in recent months, and as usual it is the Federal Reserve who is directly and indirectly responsible because of their view on rates.
At 5%, it seemed like the world was coming to an end but the Yield on the 10-Year Treasury was down slightly yesterday, falling down to 4.42%, and it's a new ballgame, a new outlook, and a new stock market.
Now the investment community can't get bullish enough. The TV pundits are all looking for a year end rally and getting quite optimistic, if not excessively so, despite the giant rebound we've seen already off the October 27 low. Sure, the situation seems better after the last CPI report, but the current year over year inflation rate over the last few months is still 4.9%, and the Fed target is 2%, so unless the labor market falls apart, the Fed may still be concerned about getting those levels down closer to their targets.
Again, the action is strong, and the economic picture as far as inflation and the Fed's current outlook goes, warranted a relief rally after the three month correction. The recession vs. soft landing debate has been a focus but fewer folks are on the recession side of that argument these days, but the 2-year / 10-year yield curve certainty hasn't declared a winner yet, and if anything it is getting more inverted as it fell to negative 0.47% yesterday. Anything under 0 is inverted.
While the yield curve gets more inverted, the stock market is rallying. The S&P 500 (C-fund) has finally reached up into that gap that was opened up near the late July peak. That's what gaps do, they get filled, but once that one is filled and we have short-term double top, there's a pretty good case for at least a stall in the rally, but yes the holiday season could throw a wrench in a typical pullback situation. Longer-term...
... the weekly chart throws another possible headwind as the descending resistance line off the 2021 highs will be tested when that gap in the daily chart gets filled.
I went back and looked at the action from 2020. Granted, it was the COVID recovery rally and stimulus was flying, but look how similar the action was from late October until November 20 that year, compared to this year (red boxes.)
Back then, the market continued higher with just some brief dips here and there, and an eventual moved higher into the end of December. Is that what's in store this year?
By the way, that lone open gap on the 2020 chart in November has never been filled. The S&P 500 did come down below 3500 in October of 2022, but it never quite made it down to that gap near 3400.
Nvidia reports earnings after the bell today, and that could be the market mover for tomorrow.
DWCPF (S-fund) broke above key resistance last week and the pullback last Thursday found support at the 200-day EMA. This has momentum and it did have a decent pullback in early November, so the chart looks more sustainable, perhaps even more so than the S&P 500 chart, but we know how volatile small caps can be.
EFA (I-fund) also flew through its major moving averages and the descending resistance line, and yesterday it hit the September 1st highs. Maybe this is a place for another little dip as there is a small open gap near 71, and of course that big one down by 69.50.
BND (bonds / F-fund) was up again and this time it closed above its 200-day EMA, but that 200-day simple average is still 0.25 away. Gaps, gaps, gaps. Will they get filled or will this become a runaway train?
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
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.
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]
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[TD="width: 338, align: center"] Daily TSP Funds Return
[TR]
[TD="align: right"][/TD]
[/TR]
[/TABLE]
[/TD]
[/TR]
[/TABLE]
The stock market (and the business community) is so dependent on interest rates that everything the Fed says and does is interpreted in how that relates to those interest rates. And every economic data report that comes out is weighed by what the Fed might think about that data.
During the rise in yields in the early fall, stocks were declining for three months. Now we got a couple inflation calming reports and stocks have gone straight up for the last three weeks.
For the S&P 500, yesterday was the 5th straight positive close and the 14th of the last 16 trading days. Before this winning streak the S&P 500 was down 10 of 12 trading days and August and September charts were a sea of red, so it has been all or nothing in recent months, and as usual it is the Federal Reserve who is directly and indirectly responsible because of their view on rates.
At 5%, it seemed like the world was coming to an end but the Yield on the 10-Year Treasury was down slightly yesterday, falling down to 4.42%, and it's a new ballgame, a new outlook, and a new stock market.
Now the investment community can't get bullish enough. The TV pundits are all looking for a year end rally and getting quite optimistic, if not excessively so, despite the giant rebound we've seen already off the October 27 low. Sure, the situation seems better after the last CPI report, but the current year over year inflation rate over the last few months is still 4.9%, and the Fed target is 2%, so unless the labor market falls apart, the Fed may still be concerned about getting those levels down closer to their targets.
Again, the action is strong, and the economic picture as far as inflation and the Fed's current outlook goes, warranted a relief rally after the three month correction. The recession vs. soft landing debate has been a focus but fewer folks are on the recession side of that argument these days, but the 2-year / 10-year yield curve certainty hasn't declared a winner yet, and if anything it is getting more inverted as it fell to negative 0.47% yesterday. Anything under 0 is inverted.
While the yield curve gets more inverted, the stock market is rallying. The S&P 500 (C-fund) has finally reached up into that gap that was opened up near the late July peak. That's what gaps do, they get filled, but once that one is filled and we have short-term double top, there's a pretty good case for at least a stall in the rally, but yes the holiday season could throw a wrench in a typical pullback situation. Longer-term...
... the weekly chart throws another possible headwind as the descending resistance line off the 2021 highs will be tested when that gap in the daily chart gets filled.
I went back and looked at the action from 2020. Granted, it was the COVID recovery rally and stimulus was flying, but look how similar the action was from late October until November 20 that year, compared to this year (red boxes.)
Back then, the market continued higher with just some brief dips here and there, and an eventual moved higher into the end of December. Is that what's in store this year?
By the way, that lone open gap on the 2020 chart in November has never been filled. The S&P 500 did come down below 3500 in October of 2022, but it never quite made it down to that gap near 3400.
Nvidia reports earnings after the bell today, and that could be the market mover for tomorrow.
DWCPF (S-fund) broke above key resistance last week and the pullback last Thursday found support at the 200-day EMA. This has momentum and it did have a decent pullback in early November, so the chart looks more sustainable, perhaps even more so than the S&P 500 chart, but we know how volatile small caps can be.
EFA (I-fund) also flew through its major moving averages and the descending resistance line, and yesterday it hit the September 1st highs. Maybe this is a place for another little dip as there is a small open gap near 71, and of course that big one down by 69.50.
BND (bonds / F-fund) was up again and this time it closed above its 200-day EMA, but that 200-day simple average is still 0.25 away. Gaps, gaps, gaps. Will they get filled or will this become a runaway train?
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
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.
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.
