Another day, another reversal. Tuesday's was the second negative reversal in a row after we saw a nice push higher off the morning lows, only to see the selling resume in the final 90 minutes of trading. The Dow lost 232-points and moderate gains turned into moderate losses by the close. Small caps also gave up a big gain but managed to stay flat. Bonds were up a bit as yields slid into the close.
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It was the end of a poor month for stocks, and perhaps that had something to do with that late selling yesterday. Before February we had a pretty good rally off the October lows and we have to go back to August and September to find months that closed at the monthly low of a negative month. Perhaps I am grasping at straws, but following months started out on the strong side in both of those cases. However, in the case of August into September, the gain in the first 7 days of September turned out to be a good selling opportunity.
Historically February is a weaker than average month for the S&P 500 and only September had a worse record from 1950 - 2011. But here comes March, which is typically a decent month for stocks if we forget about 2020 and the COVID crash year. This chart only goes through 2011, but that's a lot of data and being up almost 65% of the time during that period even outperformed January's percentage of times positive, although January's average return was higher.
Chart provided courtesy of www.sentimentrader.com
The S&P 500 ended the month at a crucial crossroads where both the ascending and descending long term support lines are meeting just below where it closed yesterday. That looks like a possible make or break area as it sits looking over that precipice below 3950.
The Yield on the 10-year Treasury also reversed lower off its highs yesterday, but there was something funny about it all. Stocks were up when yields were up in the morning, and both stocks and yields sold off into the close yesterday. That tells me that, despite both stocks and bonds having a bad month in February, there was a little bit of rebalancing going on with money managers to sell some stocks and buy some bonds into the close. (Reminder: Bonds prices go up when bond yields come down.) That could reverse itself today.
New month, new direction? I'll give the bulls a slight advantage going into the new month, but like August and September, as mentioned above, it may be presenting selling opportunities. However, the difference may be that stocks were trending lower back then, and currently stocks are just pulling back in a positive trending market - although testing key support now.
If we were told at the end of 2022 that the TSP stocks funds would be up between 3.5% and 9% through February of this year, most of us would have been ecstatic, but the way it is playing out most of us are still concerned because of a , "what have you done for me lately" attitude. The concerns are real as we know the current headlines and the charts are teetering on breaking down, but so far so good for 2023, no?
The S&P 500 (C-fund) gave up a nice midday rally to close at the lows yesterday and that kept it below those key moving averages and below that old support line. This doesn't look great but the market leaders like the small caps and the Dow Transportation Index do look OK. The question is whether those leaders can lead the S&P back up, or will they succumb to the pressure of this weakness in the S&P 500? Trading volume was higher than normal yesterday suggesting there was some big money involved in end of month rebalancing.
The DWCPF (S-fund) lost its large afternoon gains but this chart continues to hold in an area where support is solid, but do or die at this point.
The EFA (I-fund) has been chopping back and forth, filling in two gaps it opened recently. That falling wedge pattern tends to be bullish but that 50-day EMA really needs to hold.
BND (bonds / F-fund) was up after retesting the neckline of that head and shoulders pattern. H&S patterns are bearish, but this could rally in the short term if it is going to fill in that right shoulder. Should that happen it could be a catalyst for an early March rally in stocks and bonds.
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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It was the end of a poor month for stocks, and perhaps that had something to do with that late selling yesterday. Before February we had a pretty good rally off the October lows and we have to go back to August and September to find months that closed at the monthly low of a negative month. Perhaps I am grasping at straws, but following months started out on the strong side in both of those cases. However, in the case of August into September, the gain in the first 7 days of September turned out to be a good selling opportunity.
Historically February is a weaker than average month for the S&P 500 and only September had a worse record from 1950 - 2011. But here comes March, which is typically a decent month for stocks if we forget about 2020 and the COVID crash year. This chart only goes through 2011, but that's a lot of data and being up almost 65% of the time during that period even outperformed January's percentage of times positive, although January's average return was higher.
Chart provided courtesy of www.sentimentrader.com
The S&P 500 ended the month at a crucial crossroads where both the ascending and descending long term support lines are meeting just below where it closed yesterday. That looks like a possible make or break area as it sits looking over that precipice below 3950.
The Yield on the 10-year Treasury also reversed lower off its highs yesterday, but there was something funny about it all. Stocks were up when yields were up in the morning, and both stocks and yields sold off into the close yesterday. That tells me that, despite both stocks and bonds having a bad month in February, there was a little bit of rebalancing going on with money managers to sell some stocks and buy some bonds into the close. (Reminder: Bonds prices go up when bond yields come down.) That could reverse itself today.
New month, new direction? I'll give the bulls a slight advantage going into the new month, but like August and September, as mentioned above, it may be presenting selling opportunities. However, the difference may be that stocks were trending lower back then, and currently stocks are just pulling back in a positive trending market - although testing key support now.
If we were told at the end of 2022 that the TSP stocks funds would be up between 3.5% and 9% through February of this year, most of us would have been ecstatic, but the way it is playing out most of us are still concerned because of a , "what have you done for me lately" attitude. The concerns are real as we know the current headlines and the charts are teetering on breaking down, but so far so good for 2023, no?
The S&P 500 (C-fund) gave up a nice midday rally to close at the lows yesterday and that kept it below those key moving averages and below that old support line. This doesn't look great but the market leaders like the small caps and the Dow Transportation Index do look OK. The question is whether those leaders can lead the S&P back up, or will they succumb to the pressure of this weakness in the S&P 500? Trading volume was higher than normal yesterday suggesting there was some big money involved in end of month rebalancing.
The DWCPF (S-fund) lost its large afternoon gains but this chart continues to hold in an area where support is solid, but do or die at this point.
The EFA (I-fund) has been chopping back and forth, filling in two gaps it opened recently. That falling wedge pattern tends to be bullish but that 50-day EMA really needs to hold.
BND (bonds / F-fund) was up after retesting the neckline of that head and shoulders pattern. H&S patterns are bearish, but this could rally in the short term if it is going to fill in that right shoulder. Should that happen it could be a catalyst for an early March rally in stocks and bonds.
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.
