Stocks gapped up higher on Thursday, maintained those gains for several hours, but reversed late thanks to some opinionated comments from a Federal Reserve Board Member, and a spike in oil prices from escalated tension in the Middle East, bringing inflation fears back to the forefront. It was a classic negative outside reversal day on the charts, which is usually very bearish, so can today's jobs report help the situation or will it add more fuel to the fire?
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This seems like this should not be allowed. Minneapolis Fed President Neel Kashkari wondered out loud if the central bank should cut rates at all if inflation remained sticky to the upside. This is not the consensus of all Fed members and in fact the market was still pricing in a 100% chance of three interest rate cuts this year. These comments had investors scurrying, not sure what to think.
I thought today's jobs report could be the shake out day, or the day that we got something like we saw yesterday - a pop and drop, but the market and Kashkari threw us a curve.
As is almost always the case, when I have something going on personally and I am out of the office, the market decides to go manic on us. I was going to make today's commentary brief, but we'll see...
The big question is whether we should get more bearish now after this activity, or should the bulls stay the course? Short-term, I can see some volatility up and down as investors try to put the pieces together, but the large outside reversal day does tend to have more meaning than just a down day. Take a look at the July 2023 peak.
And here we are now. The S&P 500 (C-fund) opened higher and filled an open gap during the morning rally. It did not make a new high like it did above in July, but the negative reversal was just as dramatic. That fantastic 15-day EMA finally broke down and the index closed just a couple of points above its 30-day EMA - the moving average that the Nasdaq and small cap charts have been using as support.
The 10-year Treasury Yield didn't react quite as we might expect when a Fed member says he wonders if we should cut rates at all this year. It was down sharply, filled an open gap, and fell back into the right shoulder of the inverted head and shoulders pattern.
The dollar reversed up as stocks were reversing lower yesterday, but it ended the day flat.
We get the March Friday's jobs report this morning and estimates are looking for a gain of 200K to 210K jobs and an unemployment rate of 3.8%. Coming after yesterday's dramatic reversal day makes this report a little more important than it already was.
Admin Note: I am out of town again today so I may not be on top of things. I will be checking in on emails and the forum as much as I can.
DWCPF (S-fund) also created a negative outside reversal day, filling in its open gap in the process, but it did test and hold near the 30-day EMA (green) again, as it has done several times this year. Do or die time for small caps?
The EFA (I-fund) did not escape the reversal and it is now testing the important 50-day EMA - something it has not done in almost two months and the previous two occurrence turned out to be good buying opportunities.
Thanks so much for reading! Have a great weekend!
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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This seems like this should not be allowed. Minneapolis Fed President Neel Kashkari wondered out loud if the central bank should cut rates at all if inflation remained sticky to the upside. This is not the consensus of all Fed members and in fact the market was still pricing in a 100% chance of three interest rate cuts this year. These comments had investors scurrying, not sure what to think.
I thought today's jobs report could be the shake out day, or the day that we got something like we saw yesterday - a pop and drop, but the market and Kashkari threw us a curve.
As is almost always the case, when I have something going on personally and I am out of the office, the market decides to go manic on us. I was going to make today's commentary brief, but we'll see...
The big question is whether we should get more bearish now after this activity, or should the bulls stay the course? Short-term, I can see some volatility up and down as investors try to put the pieces together, but the large outside reversal day does tend to have more meaning than just a down day. Take a look at the July 2023 peak.
And here we are now. The S&P 500 (C-fund) opened higher and filled an open gap during the morning rally. It did not make a new high like it did above in July, but the negative reversal was just as dramatic. That fantastic 15-day EMA finally broke down and the index closed just a couple of points above its 30-day EMA - the moving average that the Nasdaq and small cap charts have been using as support.
The 10-year Treasury Yield didn't react quite as we might expect when a Fed member says he wonders if we should cut rates at all this year. It was down sharply, filled an open gap, and fell back into the right shoulder of the inverted head and shoulders pattern.
The dollar reversed up as stocks were reversing lower yesterday, but it ended the day flat.
We get the March Friday's jobs report this morning and estimates are looking for a gain of 200K to 210K jobs and an unemployment rate of 3.8%. Coming after yesterday's dramatic reversal day makes this report a little more important than it already was.
Admin Note: I am out of town again today so I may not be on top of things. I will be checking in on emails and the forum as much as I can.
DWCPF (S-fund) also created a negative outside reversal day, filling in its open gap in the process, but it did test and hold near the 30-day EMA (green) again, as it has done several times this year. Do or die time for small caps?
The EFA (I-fund) did not escape the reversal and it is now testing the important 50-day EMA - something it has not done in almost two months and the previous two occurrence turned out to be good buying opportunities.
Thanks so much for reading! Have a great weekend!
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.
