Stocks bounced back on Friday from some very oversold conditions. The averted government shutdown helped the situation, but it was really more of a release value being opened after all of the selling pressure. It doesn't mean the low is in, but that is a possibility. Rebounds can be very powerful, or very brief, but prior quick corrections have led to some good returns going forward.
Week two in March wasn't much better than week one, but Friday gave the bulls a little hope as they look for some relief from the awful start.
The rally on Friday materialized despite a very poor Consumer Confidence Report.
From briefing.com:
"The preliminary University of Michigan Index of Consumer Sentiment for March dropped to 57.9 (Briefing.com consensus 65.6) from the final reading of 64.7 for February, marking the third straight drop in sentiment."
However, like many sentiment type indicators, extreme readings often lead to a counter reaction, basically because the market has been pricing most of these concerns in. The consumer is usually the last to react.
The 57.9 reading was the lowest since November of 2022.
Sounds awful, right. But look what happened to the stock market since November of 2022, which was the end of the bear market...
The S&P 500 (C-fund) rallied over 2% on Friday but you can see that there is a still a lot of work to be done if this is going to clear any of that tangled web of resistance between 5650 and 5700. Going back to 1950 there have only been 5 faster 10% corrections. All of them resulted in higher prices 3 and 6 months later.
It was a light volume rally on Friday, which makes it a little suspicious. The glass half empty theory is that the light volume means the smart money institutional money managers were not buying. The glass half full theory is that there are still plenty of bears out there that may be forced to buy if the the rally follows through early this week.
Despite the light volume, 90% of the volume was upside volume, which is a very bullish sign.
Is there any reason for Friday's rally to continue? Only because the market is so oversold. "V" bottoms have been more common in recent years for some reason, although typically we see a decent bounce and a retest of the lows at some point - even if Thursday was the bottom, so how you play this can be very tricky. Do you lock in some gains after a modest bounce or risk giving all of the any gains back with the possibility of catching a major league rebound? These are questions and you want answers. Unfortunately, we can only deal in probabilities because in the short term we know anything can happen, and the biggest market rallies tend to come after a major loss.
There is an FOMC meeting this week. There are no expectations of an interest rate cut being announced this week, but the chances of a cut between now and the September meeting are near 100%, with a 65% chance that we'll see two cuts by then.
Ready for our annual March Madness Contest? More info! Deadline to enter is the start of Thursday's first game.
DWCPF (S-fund) has been obliterated in the last four weeks but Friday's rally pushed above the steeply declining resistance line. That's not a green light for a bottom, but it does bode well for a possible move to test resistance so we could easily see a short-term relief rally up to 2150 or 2200.
ACWX (the I-fund tracking index) had a decent day on Friday, although the US stock did have a rare outperformance. The bullish looking flag is starting to look more like a diamond formation, which could be troublesome.
"What Is a Diamond Top Formation? A diamond top formation is a technical analysis pattern that often occurs at, or near, market tops and can signal a reversal of an uptrend. It is so named because the trendlines connecting the peaks and troughs carved out by the security's price action form the shape of a diamond." Source: https://www.investopedia.com/terms/d/diamondtop.asp)
Source: https://www.strike.money/technical-analysis/diamond-pattern
BND (F-fund) has been trending lower recently despise data that would suggest it should be going the other way. We've seen some inflation numbers that have been benign, and concerning economic numbers. Either of these would typically send yields lower and bond prices higher. That's not what has been happening so far in March. Again, it could be technical pullback to get that open gap filled before resuming higher - or something else is cooking that we're not aware of yet.
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
Questions, comments, or issues with today's commentary? We can discuss it in the Forum.
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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 may use additional methods and strategies to determine fund positions.
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Week two in March wasn't much better than week one, but Friday gave the bulls a little hope as they look for some relief from the awful start.
The rally on Friday materialized despite a very poor Consumer Confidence Report.
From briefing.com:
"The preliminary University of Michigan Index of Consumer Sentiment for March dropped to 57.9 (Briefing.com consensus 65.6) from the final reading of 64.7 for February, marking the third straight drop in sentiment."
However, like many sentiment type indicators, extreme readings often lead to a counter reaction, basically because the market has been pricing most of these concerns in. The consumer is usually the last to react.
The 57.9 reading was the lowest since November of 2022.
Sounds awful, right. But look what happened to the stock market since November of 2022, which was the end of the bear market...
The S&P 500 (C-fund) rallied over 2% on Friday but you can see that there is a still a lot of work to be done if this is going to clear any of that tangled web of resistance between 5650 and 5700. Going back to 1950 there have only been 5 faster 10% corrections. All of them resulted in higher prices 3 and 6 months later.
It was a light volume rally on Friday, which makes it a little suspicious. The glass half empty theory is that the light volume means the smart money institutional money managers were not buying. The glass half full theory is that there are still plenty of bears out there that may be forced to buy if the the rally follows through early this week.
Despite the light volume, 90% of the volume was upside volume, which is a very bullish sign.
Is there any reason for Friday's rally to continue? Only because the market is so oversold. "V" bottoms have been more common in recent years for some reason, although typically we see a decent bounce and a retest of the lows at some point - even if Thursday was the bottom, so how you play this can be very tricky. Do you lock in some gains after a modest bounce or risk giving all of the any gains back with the possibility of catching a major league rebound? These are questions and you want answers. Unfortunately, we can only deal in probabilities because in the short term we know anything can happen, and the biggest market rallies tend to come after a major loss.
There is an FOMC meeting this week. There are no expectations of an interest rate cut being announced this week, but the chances of a cut between now and the September meeting are near 100%, with a 65% chance that we'll see two cuts by then.
Ready for our annual March Madness Contest? More info! Deadline to enter is the start of Thursday's first game.
DWCPF (S-fund) has been obliterated in the last four weeks but Friday's rally pushed above the steeply declining resistance line. That's not a green light for a bottom, but it does bode well for a possible move to test resistance so we could easily see a short-term relief rally up to 2150 or 2200.
ACWX (the I-fund tracking index) had a decent day on Friday, although the US stock did have a rare outperformance. The bullish looking flag is starting to look more like a diamond formation, which could be troublesome.
"What Is a Diamond Top Formation? A diamond top formation is a technical analysis pattern that often occurs at, or near, market tops and can signal a reversal of an uptrend. It is so named because the trendlines connecting the peaks and troughs carved out by the security's price action form the shape of a diamond." Source: https://www.investopedia.com/terms/d/diamondtop.asp)
Source: https://www.strike.money/technical-analysis/diamond-pattern
BND (F-fund) has been trending lower recently despise data that would suggest it should be going the other way. We've seen some inflation numbers that have been benign, and concerning economic numbers. Either of these would typically send yields lower and bond prices higher. That's not what has been happening so far in March. Again, it could be technical pullback to get that open gap filled before resuming higher - or something else is cooking that we're not aware of yet.
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
Questions, comments, or issues with today's commentary? We can discuss it in the Forum.
Daily Market Commentary Archives
For more info our other premium services, please go here... www.tsptalk.com/premiums.php
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 may use additional methods and strategies to determine fund positions.
