It was an interesting start to November, although it's not too surprising to see green on the first day of a new month. The Dow gained a modest 94-points while the S&P 500 spent about half the day in the red before rallying into the close to gain 0.18% on the day, but it was the small caps that stole the show as investors perhaps are positioning themselves for typically strong period for small cap stocks. There's no doubt that things are extended and it is getting cringe-worthy, but the money keeps flowing in and the Fed has created an environment where this seems to be the best game in town.
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The S&P 500 (C-fund) made another new high yesterday, and the bullish action is kind of what you'd expect on the first trading day in November, although as we talked about yesterday, sometimes we get a new month, new direction reaction, even if the first day or two are up, so I'm not so sure if this rally can continue for too much longer. It doesn't have to come crashing down, but at least some digesting of the October gains is possible, and filling some of those gaps would be nice.
The DWCPF (S-fund) had a big day - not as big as the Russell 2000 small caps' gained of 2.7%, but a 1.8% gain is quite impressive as we head into the more bullish part of the year for small caps. Again, that doesn't mean stocks have to go straight up, but small caps do like November and December.
The longer term chart shows how much resistance it broke through recently, but also the next levels of resistance it will have to battle.
The EFA (I-fund) continues to ride up that small blue trading channel, although there could be some resistance at yesterday's highs. The weakness in the dollar helped on Monday after Friday's rally in the dollar punished the I-fund.
BND (Bonds / F-fund) was down but it closed well off the lows for a second straight day. As I mentioned above, the bond market has been trying to stabilize with yields slipping lower in recent weeks, sending the F-fund up a bit. But it is still below some key resistance and there's a possible bear flag here as well.
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 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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The Fed's FOMC meeting starts today but we may not get much info out of them until tomorrow about the tapering of their bond buying program, and / or the future of interest rates. This market has fed (no pun intended) on the easy money so there's no doubt that we could see a bit of a tantrum from investors if they indicate any weaning.
At this point, any continued gains and you have to seriously consider taking some profits, if you have them, and are trying to time the market at all. Of course the buy and holders will get every penny this market is willing to give, but they will also take the full brunt of any serious pullback. As we also say, the market can move in one direction longer than feels comfortable, but the S&P 500 and Nasdaq have been up in 12 of the last 14 trading days, and that's getting extreme.
Finally some decent news from GDPNow. As I have been reporting, their 3rd quarter GDP estimate went from about 6.3% to 0.2%, before we got the final number which was closer to 2.0%. Yesterday they bumped up their GDP estimate for the 4th quarter, and it's an impressive number. This could be what the market has been seeing.
From GDPNow: "Latest Estimate of Fourth-Quarter GDP Growth Is 8.2 Percent On November 1, the GDPNow model estimate for real GDP growth in the fourth quarter of 2021 is 8.2 percent, up from 6.6 percent on October 29."
The yield on the 10-year Treasury does not appear to be on the same page as that number as yields continue to slip and if anything, this chart looks like it is ready to break down with that bear flag forming. Yields tend to move up when the economy is strengthening, and they did move up nicely on this 4 month chart, but more recently the bond market isn't indicating much economic strength as the yield remains below 1.6%.
The dollar was down yesterday so not only did we see stocks up, but gold, silver, copper, and oil all rallied as well.
Internally it was all positive with both the NYSE and Nasdaq showing very strong breadth, and these are near breadth thrust type ratios. That's a little surprising considering the S&P and Dow were only up about 0.2%. The small caps really helped boost these numbers.
Another heavy day of earnings today including companies like Pfizer, Amgen, Zillow, Lyft, and dozens more. None are huge market movers, but at this point the cumulative earnings are trying to justify this huge jump in stock prices recently.
At this point, any continued gains and you have to seriously consider taking some profits, if you have them, and are trying to time the market at all. Of course the buy and holders will get every penny this market is willing to give, but they will also take the full brunt of any serious pullback. As we also say, the market can move in one direction longer than feels comfortable, but the S&P 500 and Nasdaq have been up in 12 of the last 14 trading days, and that's getting extreme.
Finally some decent news from GDPNow. As I have been reporting, their 3rd quarter GDP estimate went from about 6.3% to 0.2%, before we got the final number which was closer to 2.0%. Yesterday they bumped up their GDP estimate for the 4th quarter, and it's an impressive number. This could be what the market has been seeing.
From GDPNow: "Latest Estimate of Fourth-Quarter GDP Growth Is 8.2 Percent On November 1, the GDPNow model estimate for real GDP growth in the fourth quarter of 2021 is 8.2 percent, up from 6.6 percent on October 29."
The yield on the 10-year Treasury does not appear to be on the same page as that number as yields continue to slip and if anything, this chart looks like it is ready to break down with that bear flag forming. Yields tend to move up when the economy is strengthening, and they did move up nicely on this 4 month chart, but more recently the bond market isn't indicating much economic strength as the yield remains below 1.6%.
The dollar was down yesterday so not only did we see stocks up, but gold, silver, copper, and oil all rallied as well.
Internally it was all positive with both the NYSE and Nasdaq showing very strong breadth, and these are near breadth thrust type ratios. That's a little surprising considering the S&P and Dow were only up about 0.2%. The small caps really helped boost these numbers.
Another heavy day of earnings today including companies like Pfizer, Amgen, Zillow, Lyft, and dozens more. None are huge market movers, but at this point the cumulative earnings are trying to justify this huge jump in stock prices recently.
The S&P 500 (C-fund) made another new high yesterday, and the bullish action is kind of what you'd expect on the first trading day in November, although as we talked about yesterday, sometimes we get a new month, new direction reaction, even if the first day or two are up, so I'm not so sure if this rally can continue for too much longer. It doesn't have to come crashing down, but at least some digesting of the October gains is possible, and filling some of those gaps would be nice.
The DWCPF (S-fund) had a big day - not as big as the Russell 2000 small caps' gained of 2.7%, but a 1.8% gain is quite impressive as we head into the more bullish part of the year for small caps. Again, that doesn't mean stocks have to go straight up, but small caps do like November and December.
The longer term chart shows how much resistance it broke through recently, but also the next levels of resistance it will have to battle.
The EFA (I-fund) continues to ride up that small blue trading channel, although there could be some resistance at yesterday's highs. The weakness in the dollar helped on Monday after Friday's rally in the dollar punished the I-fund.
BND (Bonds / F-fund) was down but it closed well off the lows for a second straight day. As I mentioned above, the bond market has been trying to stabilize with yields slipping lower in recent weeks, sending the F-fund up a bit. But it is still below some key resistance and there's a possible bear flag here as well.
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 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.
