A nice little snap back rally for stocks yesterday thanks to a pullback in yields, the dollar, and the price of oil - all of which had been headwinds recently as they moved higher. The Dow jumped 436-points while the Nasdaq and small caps gained over 2% each. Bonds were up sharply as the yields dropped, and the 0.71% decline in the dollar is always an I-fund crowd pleaser.
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The Atlanta Fed's GDPNow, which has been all over the map recently in the GDP estimates for the third quarter, dropped their estimate from 2.6% to 1.4% yesterday. This basically reversed their prior estimate so the weakening data was given an assist in pushing yields and the dollar down, and possibly helped oil fall $5 a barrel on the day. That was a combination of price movement that the stock found appealing.
Internally the numbers were very lopsided on the upside, but not quite the 9 to 1 ratio in volume that technicians look for to signal market lows. You can see that the new lows continue to pile up but most of those came early on yesterday when the indices were slightly down in the morning before starting to rally.
Here's the decline in the Yield on the 10-Year Treasury and the dollar. The trends are still up but there are some open gaps in the 10-year yield that will likely get some attention at some point.
As for the dollar, the negative reversal yesterday merely filled another open gap from Tuesday. You can see how quickly some of these gaps get filled on the UUP. The most immediate open gap now is down below 28.25, and that would be a significant drop if that gets filled, but that one could take awhile.
I looked at the length of some of the relief rallies in recent months. I don't look at the bear marker rally the same. Those can be explosive in bear markets as we witnessed but they don't usually come back to back so I was more interested in the rebounds surrounding the June to August rally.
Typically it looks like we see three day rallies, although in this most recent decline we have only seen one or two day rallies before the downside resumed. If that holds then maybe yesterday was all we will get, or maybe another one or two more days to the upside, and then the bears may come back and see what they can do.
If however, we do get a sustained rally, perhaps a higher low will be formed. I don't see that happening but if it does I will try not to fight it too much.
The next CPI report comes out on September 13 and the next Fed FOMC meeting is on the 20th and 21st.
Admin Note: We've started the 2022 NFL Survivor Pool and here's some info on how to get in. The deadline to sign up is Sunday the 11th at 1 PM ET. It's free, and very easy, and there are prizes for the top finishers. Pick one winner each week. Win, and you move on. Lose, and you're out. How many weeks can you last? Invite your friends if you want to compete with them. [More]
The S&P 500 (C-fund) had a lot of support in the 3900 area and so far it is holding. That was a good place for a relief rally to start, but it doesn't say too much more than that unless we start to see some overhead resistance getting taken out. That could take a move back above 4050 where the descending resistance line and the 50-day EMA are meeting. That might be tough.
The DWCPF (S-fund / small caps) also had support rising up from the June low and it is holding as well. The chart has had a lot of damage done to it in the last 2 - 3 weeks, and just heading right back above those moving averages, while possible, doesn't seem likely.
EFA (I-fund) really needed that decline in the dollar as it flirted with its June lows before the dollar reversed down. As I mentioned in the UUP chart up top, the open gap from Tuesday was filled and it is possible that is the only downside that we'll see. The bottom of recent filled gaps have been holding.
The BND (Bonds / F-fund) had a big day and it is now back above the one support line that it gave up on Tuesday. The push higher yesterday came close to filling Tuesday's open gap, and there's another open gap near 75.50, but that a long way from the current level.
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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The Atlanta Fed's GDPNow, which has been all over the map recently in the GDP estimates for the third quarter, dropped their estimate from 2.6% to 1.4% yesterday. This basically reversed their prior estimate so the weakening data was given an assist in pushing yields and the dollar down, and possibly helped oil fall $5 a barrel on the day. That was a combination of price movement that the stock found appealing.
Internally the numbers were very lopsided on the upside, but not quite the 9 to 1 ratio in volume that technicians look for to signal market lows. You can see that the new lows continue to pile up but most of those came early on yesterday when the indices were slightly down in the morning before starting to rally.
Here's the decline in the Yield on the 10-Year Treasury and the dollar. The trends are still up but there are some open gaps in the 10-year yield that will likely get some attention at some point.
As for the dollar, the negative reversal yesterday merely filled another open gap from Tuesday. You can see how quickly some of these gaps get filled on the UUP. The most immediate open gap now is down below 28.25, and that would be a significant drop if that gets filled, but that one could take awhile.
I looked at the length of some of the relief rallies in recent months. I don't look at the bear marker rally the same. Those can be explosive in bear markets as we witnessed but they don't usually come back to back so I was more interested in the rebounds surrounding the June to August rally.
Typically it looks like we see three day rallies, although in this most recent decline we have only seen one or two day rallies before the downside resumed. If that holds then maybe yesterday was all we will get, or maybe another one or two more days to the upside, and then the bears may come back and see what they can do.
If however, we do get a sustained rally, perhaps a higher low will be formed. I don't see that happening but if it does I will try not to fight it too much.
The next CPI report comes out on September 13 and the next Fed FOMC meeting is on the 20th and 21st.
Admin Note: We've started the 2022 NFL Survivor Pool and here's some info on how to get in. The deadline to sign up is Sunday the 11th at 1 PM ET. It's free, and very easy, and there are prizes for the top finishers. Pick one winner each week. Win, and you move on. Lose, and you're out. How many weeks can you last? Invite your friends if you want to compete with them. [More]
The S&P 500 (C-fund) had a lot of support in the 3900 area and so far it is holding. That was a good place for a relief rally to start, but it doesn't say too much more than that unless we start to see some overhead resistance getting taken out. That could take a move back above 4050 where the descending resistance line and the 50-day EMA are meeting. That might be tough.
The DWCPF (S-fund / small caps) also had support rising up from the June low and it is holding as well. The chart has had a lot of damage done to it in the last 2 - 3 weeks, and just heading right back above those moving averages, while possible, doesn't seem likely.
EFA (I-fund) really needed that decline in the dollar as it flirted with its June lows before the dollar reversed down. As I mentioned in the UUP chart up top, the open gap from Tuesday was filled and it is possible that is the only downside that we'll see. The bottom of recent filled gaps have been holding.
The BND (Bonds / F-fund) had a big day and it is now back above the one support line that it gave up on Tuesday. The push higher yesterday came close to filling Tuesday's open gap, and there's another open gap near 75.50, but that a long way from the current level.
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.
