A mixed day on Wall Street Wednesday as large cap tech has suddenly started to lag, and the broken down charts are improving and leading on the upside. The Dow gained 92-points while the S&P 500 and Nasdaq were dragged down by those big tech stocks. Small caps had another good day, but the I-fund suffered another loss and it has also been lagging in recent weeks. Bonds and the F-fund were down on the day.
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Although being early to the party often gets you the best food and drink, I don't want to dwell too much on the fact that there has been a recent shift in the leadership in the market. It could just be a short term correction of what had gotten somewhat out of hand, but if it is a change, we may have to rethink how we approach the TSP stock funds.
These next three chart illustrate the shift as the Nasdaq 100 (NDX) rolled over yesterday after a couple of mostly flat trading sessions. It hasn't quite given up all of June's gains, but almost.
If we compare that to the next three charts, those regional banks (KRE), the Dow Transportation Index, and the Russell 2000 small caps (IWM), we can see they have been moving higher with some velocity this month and perhaps this is a big reallocation by money managers that may have been long overdue?
The Equal Weighted S&P 500 (green) - where big tech stocks are not weighted more heavily - has started to outperform the S&P 500 (red) this month for the first time in a while. Again, whether this is a sustainable change in leadership, or just a short term correction remains to be seen.
Again, the S&P and the RSP are the same 500 stocks, just weighted differently.
A week from today we will get the Fed's decision on interest rates, and right now the probabilities of another quarter point hike are 28%.
The S&P 500 (C-fund) had finally broken above 4200 recently, but now 4300 seems to be a roadblock - whether temporary or some serious resistance. The whole rising wedge formation (blue) isn't the most bullish look on a chart either. We see a possible flat top which could trigger some selling, but it doesn't have to be severe. But the chart is now 210 points above its 200-day EMA and 126 above its 50-day EMA so it is fairly stretched at this point.
The DWCPF (S-fund) has taken the lead in the TSP funds as far as 'what have you done for me lately' goes. There was a negative reversal tail created yesterday so the possibility of some short term weakness is there. We also have that open gap near 1665, but it could find support from dip buyers near the 200-day EMA. The second chart goes back to the peak of DWCPF in late 2021.
A case can be made for a large head and shoulders pattern in a bearish trending market, and the recent breakout could just be the test of the middle of the head which is one of the potential outcomes of an H&S pattern. Translation - small caps are acting better but there are some reasons to be cautious if this stalls near 1750.
The EFA (I-fund) has been lagging recently and for the last three day it has been holding onto that 50-day EMA support line. There's open gaps all over, above and below - although mostly below, so we may want to proceed with caution for a little while in the I-fund.
BND (Bonds / F-fund) was slammed yesterday as yields rallied. I didn't see any particular economic reason for the rally in yields, but we do have some big inflationary reports and the Fed rate decision next week that could shake up the bond market. Will that large open gap by 71.50 finally get filled?
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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Although being early to the party often gets you the best food and drink, I don't want to dwell too much on the fact that there has been a recent shift in the leadership in the market. It could just be a short term correction of what had gotten somewhat out of hand, but if it is a change, we may have to rethink how we approach the TSP stock funds.
These next three chart illustrate the shift as the Nasdaq 100 (NDX) rolled over yesterday after a couple of mostly flat trading sessions. It hasn't quite given up all of June's gains, but almost.
If we compare that to the next three charts, those regional banks (KRE), the Dow Transportation Index, and the Russell 2000 small caps (IWM), we can see they have been moving higher with some velocity this month and perhaps this is a big reallocation by money managers that may have been long overdue?
The Equal Weighted S&P 500 (green) - where big tech stocks are not weighted more heavily - has started to outperform the S&P 500 (red) this month for the first time in a while. Again, whether this is a sustainable change in leadership, or just a short term correction remains to be seen.
Again, the S&P and the RSP are the same 500 stocks, just weighted differently.
A week from today we will get the Fed's decision on interest rates, and right now the probabilities of another quarter point hike are 28%.
The S&P 500 (C-fund) had finally broken above 4200 recently, but now 4300 seems to be a roadblock - whether temporary or some serious resistance. The whole rising wedge formation (blue) isn't the most bullish look on a chart either. We see a possible flat top which could trigger some selling, but it doesn't have to be severe. But the chart is now 210 points above its 200-day EMA and 126 above its 50-day EMA so it is fairly stretched at this point.
The DWCPF (S-fund) has taken the lead in the TSP funds as far as 'what have you done for me lately' goes. There was a negative reversal tail created yesterday so the possibility of some short term weakness is there. We also have that open gap near 1665, but it could find support from dip buyers near the 200-day EMA. The second chart goes back to the peak of DWCPF in late 2021.
A case can be made for a large head and shoulders pattern in a bearish trending market, and the recent breakout could just be the test of the middle of the head which is one of the potential outcomes of an H&S pattern. Translation - small caps are acting better but there are some reasons to be cautious if this stalls near 1750.
The EFA (I-fund) has been lagging recently and for the last three day it has been holding onto that 50-day EMA support line. There's open gaps all over, above and below - although mostly below, so we may want to proceed with caution for a little while in the I-fund.
BND (Bonds / F-fund) was slammed yesterday as yields rallied. I didn't see any particular economic reason for the rally in yields, but we do have some big inflationary reports and the Fed rate decision next week that could shake up the bond market. Will that large open gap by 71.50 finally get filled?
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.
