Stocks rallied early on Wednesday but it was another choppy day that ended with losses for the major indices. The Dow lost 280-points and what looked like some last minute program driven selling took the indices down near their lows of the day by the close. Yields were up slightly, the dollar was knocking on that new high door again - but no new high yet, and oil came down sharply again on fears of an economic slowdown.
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With the dollar down slightly and oil down more sharply, it was only the rise in yields that was an obstacle for equities, and that was enough to tack on another losing day for the stock market. So, no pre-holiday reversals yet.
As our TSP Talk Plus subscribers know, I chickened out on trying to play any possible pre-holiday bounce. I didn't have any specific buy signal from our Plus System, but having an IFT left in August, I seriously debated about making a move to try to catch a relief rally before the holiday. Then some wise words from RevShark to his subscribers in his morning commentary helped talk me out of it because it sounded very familiar. He said, "In this sort of market environment, it is very important to be clear about your market strategy. If you are very short-term, then you have to be watching for some counter-trend moves, but the biggest mistake that traders make is to let these short-term trades turn into longer-term investments when they don’t work."
And I have been there before, so I passed on a buy for now but I wouldn't be too surprised if we saw a positive day or two in the coming days. I will be waiting for that Plus System to help tell me when to get in, and that could happen soon, or weeks from now - not sure. It's a bear market and the system gets stingy with buys signals in a bear market.
September always gives investors some agita. This is a very old chart but it is 62 years worth of data from 1950 to 2011, and... you get the picture on what's what in September, compared to the other months.
Chart provided courtesy of www.sentimentrader.com
Here is some more recent returns with the last two years living up to the historical data.
And here is the up to data seasonality chart going back 30 years from sentimenTrader.com. There is a lot of red on the chart - especially in the latter half of the month, so be careful.
Chart provided courtesy of www.sentimentrader.com
September is also the month where the Fed will begin shrinking their balance sheet by $95 billion per month. That, along with the interest rates hikes, has the market riding into a headwind going forward.
The dollar knocked again on the new high door, but again no one answered. I would think eventually someone will let it in (new highs) because that is a bullish chart for UUP.
Oil was down another $2 yesterday so the rally that started the week has faded and oil is actually now down for the week, and that should have been good news for stocks, but perhaps investors know that this decline is not because of a surplus in supply, but rather the speculation that demand will be cut as the Fed weakens the knees of the economy.
We get the August jobs report tomorrow morning and estimates are looking for a gain of 300,000 jobs and an unemployment rate of 3.5%, and of course the ramifications of that report could impact the Fed's decision of how much they will raise interest rates later in the month.
From tsp.gov: "Some financial markets will be closed on Monday, September 5 in observance of the Labor Day holiday. The Thrift Savings Plan will also be closed. Transactions that would have been processed Monday night (September 5) will be processed Tuesday night (September 6), at Tuesday's closing share prices."
The S&P 500 (C-fund) chart is deteriorating and the exciting bear market rally is now a distant memory. We see some decent support between 3845 and about 3900, so that is at least another 50-points below yesterday's closing price. It doesn't have to go straight down there, and the possibility of an oversold pre-holiday rally is still there, but the chart is getting weak and any buys will be risky.
DWCPF (S-fund / small caps) is in a similar situation with signs of support not showing up until the 1650 area.
EFA (I-fund) followed through on Tuesday negative outside reversal day with another 0.68% loss, inline with the U.S. indices this time with the dollar relatively flat. Inflation in Europe has been much worse so there is no sanctuary in the I-fund right now.
The BND (Bonds / F-fund) looks like it has some firm support underneath it and a rally here could help stocks with some relief as well. Again, with two trading days left before the long holiday weekend, things can start to move against the bigger trend temporarily.
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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With the dollar down slightly and oil down more sharply, it was only the rise in yields that was an obstacle for equities, and that was enough to tack on another losing day for the stock market. So, no pre-holiday reversals yet.
As our TSP Talk Plus subscribers know, I chickened out on trying to play any possible pre-holiday bounce. I didn't have any specific buy signal from our Plus System, but having an IFT left in August, I seriously debated about making a move to try to catch a relief rally before the holiday. Then some wise words from RevShark to his subscribers in his morning commentary helped talk me out of it because it sounded very familiar. He said, "In this sort of market environment, it is very important to be clear about your market strategy. If you are very short-term, then you have to be watching for some counter-trend moves, but the biggest mistake that traders make is to let these short-term trades turn into longer-term investments when they don’t work."
And I have been there before, so I passed on a buy for now but I wouldn't be too surprised if we saw a positive day or two in the coming days. I will be waiting for that Plus System to help tell me when to get in, and that could happen soon, or weeks from now - not sure. It's a bear market and the system gets stingy with buys signals in a bear market.
September always gives investors some agita. This is a very old chart but it is 62 years worth of data from 1950 to 2011, and... you get the picture on what's what in September, compared to the other months.
Chart provided courtesy of www.sentimentrader.com
Here is some more recent returns with the last two years living up to the historical data.
And here is the up to data seasonality chart going back 30 years from sentimenTrader.com. There is a lot of red on the chart - especially in the latter half of the month, so be careful.
Chart provided courtesy of www.sentimentrader.com
September is also the month where the Fed will begin shrinking their balance sheet by $95 billion per month. That, along with the interest rates hikes, has the market riding into a headwind going forward.
The dollar knocked again on the new high door, but again no one answered. I would think eventually someone will let it in (new highs) because that is a bullish chart for UUP.
Oil was down another $2 yesterday so the rally that started the week has faded and oil is actually now down for the week, and that should have been good news for stocks, but perhaps investors know that this decline is not because of a surplus in supply, but rather the speculation that demand will be cut as the Fed weakens the knees of the economy.
We get the August jobs report tomorrow morning and estimates are looking for a gain of 300,000 jobs and an unemployment rate of 3.5%, and of course the ramifications of that report could impact the Fed's decision of how much they will raise interest rates later in the month.
From tsp.gov: "Some financial markets will be closed on Monday, September 5 in observance of the Labor Day holiday. The Thrift Savings Plan will also be closed. Transactions that would have been processed Monday night (September 5) will be processed Tuesday night (September 6), at Tuesday's closing share prices."
The S&P 500 (C-fund) chart is deteriorating and the exciting bear market rally is now a distant memory. We see some decent support between 3845 and about 3900, so that is at least another 50-points below yesterday's closing price. It doesn't have to go straight down there, and the possibility of an oversold pre-holiday rally is still there, but the chart is getting weak and any buys will be risky.
DWCPF (S-fund / small caps) is in a similar situation with signs of support not showing up until the 1650 area.
EFA (I-fund) followed through on Tuesday negative outside reversal day with another 0.68% loss, inline with the U.S. indices this time with the dollar relatively flat. Inflation in Europe has been much worse so there is no sanctuary in the I-fund right now.
The BND (Bonds / F-fund) looks like it has some firm support underneath it and a rally here could help stocks with some relief as well. Again, with two trading days left before the long holiday weekend, things can start to move against the bigger trend temporarily.
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.
