More quiet action on Wednesday although there was a little more volatility after stocks open sharply higher, but faded throughout the day to close flat, but mixed. The S&P 500 and Nasdaq were down slightly but the active small caps were at it again, jumping almost 1% on the day. That was also well off the highs and we may have seen a negative reversal, but being the last trading day of a super hot November, the question today will be whether we see monthly window dressing or just some profit taking?
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The 3rd quarter GDP came in stronger than expected, so while many economists are looking for a possible recession, or at least a slow down in the economy in 2024, the growth remains robust for now.
The mixed signals in the economy are perplexing for investors, leaving them uncertain about whether the economy is solid or faltering. Signs of a weakening economy are evident, and the behavior of bond yields suggests they are responding to this weakness. However, the confusion deepens with the recent robust GDP figures, which contrast sharply with the unexpected drop of the 10-Year Treasury Yield to a new multi-month low. Typically, such a yield drop would be anticipated after weaker-than-expected GDP data, indicating either some underlying factors at play or a significant level of uncertainty in the market.
The economically sensitive Dow Transportation Index was up sharply early yesterday after the GDP report, but it closed near its lows of the day and it is again seeking support from the key moving averages. That action has been good but the ascending support line broke recently and now those moving averages need to hold or the bears may smell weakness to pounce on.
The small caps are also economically sensitive, but they also love lower interest rates, so the decline in the yields yesterday helped them to a near 1% gain, however the negative reversal yesterday, despite the gains, gives the chart a short-term bearish look. But what a month for the small caps fund!
What happens tomorrow? More of the same or new month, new direction? December is one of the strongest months of the year historically, but it was not a pleasant month last December when the S&P lost 6% and the small caps were down closer to 7%.
Here is the seasonality calendar for December, which goes back 30 years:
Chart provided courtesy of [url]www.sentimentrader.com
[/URL]
We'll get the PCE Prices and the Personal Income and Spending reports this morning and this could be interesting if the data is inflationary, because no one expects it to be. The question is if the market can rally again off the same old 'inflation is under control' story?
The S&P 500 (C-fund) was down slightly after the morning gap up (which we can't see in this year to date chart below) but it did close below that old blue gap from late July. This is a bullish looking chart but it also a chart vulnerable to a pullback, even if it is just to create a right shoulder of a bullish inverted head and shoulders pattern - perhaps one large enough to at least fill in the open gap from earlier this month.
DWCPF (S-fund) was up nicely yesterday, but the near 1% gain was only a fraction of the gain it had to start the day, and that created a negative reversal pattern despite the gains. Whether that leads to another test of the blue trading channel or precipitates a move that finally fills one of those red open gaps, I don't know. This chart has a long way to go to reach the highs from 2021 before the bear market where it peaked just above 2400. But the long-term weekly chart shows a very bearish looking bear flag that would have a devastatingly negative target if it broke down.
EFA (I-fund) was up slightly yesterday and it continues to rise up the ascending channel. It is sitting inside an old open gap from August. With several open gaps below this would need a ton of strength to keep moving higher without considering those gaps first.
BND (bonds / F-fund) leap frogged above the old open gap from July yesterday, and it created yet another open gap below. The rate of the rally in bonds has been faster than the rapid decline we saw over the summer. That's unusual as the old saying goes that stocks and bonds usually take the escalator up, but take the elevator down. Not this time - at least not yet anyway. We'll see if there's any sharp declines filling those open gaps.
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.
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[TR]
[TD="align: right"][/TD]
[/TR]
[/TABLE]
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[/TR]
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The 3rd quarter GDP came in stronger than expected, so while many economists are looking for a possible recession, or at least a slow down in the economy in 2024, the growth remains robust for now.
The mixed signals in the economy are perplexing for investors, leaving them uncertain about whether the economy is solid or faltering. Signs of a weakening economy are evident, and the behavior of bond yields suggests they are responding to this weakness. However, the confusion deepens with the recent robust GDP figures, which contrast sharply with the unexpected drop of the 10-Year Treasury Yield to a new multi-month low. Typically, such a yield drop would be anticipated after weaker-than-expected GDP data, indicating either some underlying factors at play or a significant level of uncertainty in the market.
The economically sensitive Dow Transportation Index was up sharply early yesterday after the GDP report, but it closed near its lows of the day and it is again seeking support from the key moving averages. That action has been good but the ascending support line broke recently and now those moving averages need to hold or the bears may smell weakness to pounce on.
The small caps are also economically sensitive, but they also love lower interest rates, so the decline in the yields yesterday helped them to a near 1% gain, however the negative reversal yesterday, despite the gains, gives the chart a short-term bearish look. But what a month for the small caps fund!
What happens tomorrow? More of the same or new month, new direction? December is one of the strongest months of the year historically, but it was not a pleasant month last December when the S&P lost 6% and the small caps were down closer to 7%.
Here is the seasonality calendar for December, which goes back 30 years:
Chart provided courtesy of [url]www.sentimentrader.com
[/URL]
We'll get the PCE Prices and the Personal Income and Spending reports this morning and this could be interesting if the data is inflationary, because no one expects it to be. The question is if the market can rally again off the same old 'inflation is under control' story?
The S&P 500 (C-fund) was down slightly after the morning gap up (which we can't see in this year to date chart below) but it did close below that old blue gap from late July. This is a bullish looking chart but it also a chart vulnerable to a pullback, even if it is just to create a right shoulder of a bullish inverted head and shoulders pattern - perhaps one large enough to at least fill in the open gap from earlier this month.
DWCPF (S-fund) was up nicely yesterday, but the near 1% gain was only a fraction of the gain it had to start the day, and that created a negative reversal pattern despite the gains. Whether that leads to another test of the blue trading channel or precipitates a move that finally fills one of those red open gaps, I don't know. This chart has a long way to go to reach the highs from 2021 before the bear market where it peaked just above 2400. But the long-term weekly chart shows a very bearish looking bear flag that would have a devastatingly negative target if it broke down.
EFA (I-fund) was up slightly yesterday and it continues to rise up the ascending channel. It is sitting inside an old open gap from August. With several open gaps below this would need a ton of strength to keep moving higher without considering those gaps first.
BND (bonds / F-fund) leap frogged above the old open gap from July yesterday, and it created yet another open gap below. The rate of the rally in bonds has been faster than the rapid decline we saw over the summer. That's unusual as the old saying goes that stocks and bonds usually take the escalator up, but take the elevator down. Not this time - at least not yet anyway. We'll see if there's any sharp declines filling those open gaps.
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.
