The stock market was open yesterday but because of Veteran's Day, the TSP, the bond market, some backs, and most of us, took the day off so the commentary below is mostly reflective of Monday's market action, but because the TSP was closed, the share prices and return below are from Friday and do not reflect Monday's market action. Tuesday's prices and returns will include the market action from both Friday and Monday.
The stock market continued its transition toward the new administration, despite that there is still more than two months before Trump takes office. It could be a big "buy the rumor, sell the news" set up, but being two months out, and being at the start of the bullish season, there could be plenty of time to try to take advantage of this environment.
The S&P 500 closed above 6000 for the first time yesterday, and while it seems like a good place for the index to pause, the S&P does not tend to stop on those round numbers, although after flying past them, there is often a retest of the area on a pullback.
As we've said before, the pullbacks will come but right now they could be quite shallow as the underinvested buy the dips when they can.
We are seeing some big moves in some investments like crypto-currencies, and while that could be the sign that things are getting too hot, it's the FOMO (fear of missing out) that is causing them to go higher, for longer than we think is reasonable. It could take a lot of patience to buy into this market, or perhaps chasing will work, but that always comes with more risk.
Small caps did particularly well yesterday and between the positive seasonality for small caps, falling interest rates, and potentially a liquidity spurt for the financial system, it's tough to argue with their potential - particularly since they have lagged for so long. As you will see in the TSP fund chart section below, the S-fund is hitting the all time highs but that is also a long term double top, so we'll see what kind of momentum it has.
This chart shows a breakout from a nice looking bull flag in the Federal Reserve's balances (liquidity). The bigger this number, the more money that is in circulation. A supply of cash with lower rates is a catalysts for the stock market.
Source https://fred.stlouisfed.org/series/WRESBAL
"Reserve balances with Federal Reserve Banks are the difference between "total factors supplying reserve funds" and "total factors, other than reserve balances, absorbing reserve funds." This item includes balances at the Federal Reserve of all depository institutions that are used to satisfy reserve requirements and balances held in excess of balance requirements. It excludes reserves held in the form of cash in bank vaults, and excludes service-related deposits."
So there is fodder for more upside, but like any market, it's rare that they go straight up. Reckless buying doesn't often pay, but sometimes it does. It's a personal choice considering your tolerance for risk. Extremes should be approached with caution and there are some extremes out there, but sometimes momentum wins out. You never know what kind of momentum we're dealing with until after the fact, so to me, it's still the charts and indicators that tell the story, and right now the bulls may have to be given the benefit of the doubt.
The bond market was closed for Veteran's Day yesterday, however the Bond ETF's were down slightly suggesting yields would have moved up.
We'll get the CPI report on Wednesday, the PPI report on Thursday, and Retail Sales on Friday so we do have some potentially market moving data this week.
The wife and I will be heading out of town for a bit to celebrate our anniversary so I may be a little slow to respond to emails later today, and tomorrow's commentary may be brief.
The S&P 500 (C-fund) closed above 6000 for the first time yesterday and there is some resistance in the area, but as I mentioned above, those round numbers don't tend to stop rallies right away. We have a couple of open gaps below and to see that top one get filled wouldn't be much of a surprise, but I would be surprised if open gap #2 below 5800 was filled this year. The momentum feels too strong, and it would probably take a major negative news cycle to change that, but maybe we'll get a fill early next year.
The DWCPF (S-fund) is getting a little over-extended but this is not something new for the S-fund when it gets on a roll. It's always tough to chase a runaway chart as there is usually a better opportunity down the road, but the second chart reminds us of how powerful these rallies can get vis-a-vis post COVID, in the small caps.
However, check out the double top, which could turn out to be a temporary road block. If that double top does not stop it, look out. The momentum could go to the next level.
ACWX seems to be the ETF to follow to keep intraday tabs on the I-fund. ACWX was down slightly yesterday after being down almost 1% on Friday. You can see that update by about 9:15 PM ET here: https://www.tsptalk.com/tsp_share_prices.php
The bond market was closed on Monday but BND (Bonds / F-fund) traded down a bit after Friday's rally.
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.html
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.
The stock market continued its transition toward the new administration, despite that there is still more than two months before Trump takes office. It could be a big "buy the rumor, sell the news" set up, but being two months out, and being at the start of the bullish season, there could be plenty of time to try to take advantage of this environment.
The S&P 500 closed above 6000 for the first time yesterday, and while it seems like a good place for the index to pause, the S&P does not tend to stop on those round numbers, although after flying past them, there is often a retest of the area on a pullback.
As we've said before, the pullbacks will come but right now they could be quite shallow as the underinvested buy the dips when they can.
We are seeing some big moves in some investments like crypto-currencies, and while that could be the sign that things are getting too hot, it's the FOMO (fear of missing out) that is causing them to go higher, for longer than we think is reasonable. It could take a lot of patience to buy into this market, or perhaps chasing will work, but that always comes with more risk.
Small caps did particularly well yesterday and between the positive seasonality for small caps, falling interest rates, and potentially a liquidity spurt for the financial system, it's tough to argue with their potential - particularly since they have lagged for so long. As you will see in the TSP fund chart section below, the S-fund is hitting the all time highs but that is also a long term double top, so we'll see what kind of momentum it has.
This chart shows a breakout from a nice looking bull flag in the Federal Reserve's balances (liquidity). The bigger this number, the more money that is in circulation. A supply of cash with lower rates is a catalysts for the stock market.
Source https://fred.stlouisfed.org/series/WRESBAL
"Reserve balances with Federal Reserve Banks are the difference between "total factors supplying reserve funds" and "total factors, other than reserve balances, absorbing reserve funds." This item includes balances at the Federal Reserve of all depository institutions that are used to satisfy reserve requirements and balances held in excess of balance requirements. It excludes reserves held in the form of cash in bank vaults, and excludes service-related deposits."
So there is fodder for more upside, but like any market, it's rare that they go straight up. Reckless buying doesn't often pay, but sometimes it does. It's a personal choice considering your tolerance for risk. Extremes should be approached with caution and there are some extremes out there, but sometimes momentum wins out. You never know what kind of momentum we're dealing with until after the fact, so to me, it's still the charts and indicators that tell the story, and right now the bulls may have to be given the benefit of the doubt.
The bond market was closed for Veteran's Day yesterday, however the Bond ETF's were down slightly suggesting yields would have moved up.
We'll get the CPI report on Wednesday, the PPI report on Thursday, and Retail Sales on Friday so we do have some potentially market moving data this week.
The wife and I will be heading out of town for a bit to celebrate our anniversary so I may be a little slow to respond to emails later today, and tomorrow's commentary may be brief.
The S&P 500 (C-fund) closed above 6000 for the first time yesterday and there is some resistance in the area, but as I mentioned above, those round numbers don't tend to stop rallies right away. We have a couple of open gaps below and to see that top one get filled wouldn't be much of a surprise, but I would be surprised if open gap #2 below 5800 was filled this year. The momentum feels too strong, and it would probably take a major negative news cycle to change that, but maybe we'll get a fill early next year.
The DWCPF (S-fund) is getting a little over-extended but this is not something new for the S-fund when it gets on a roll. It's always tough to chase a runaway chart as there is usually a better opportunity down the road, but the second chart reminds us of how powerful these rallies can get vis-a-vis post COVID, in the small caps.
However, check out the double top, which could turn out to be a temporary road block. If that double top does not stop it, look out. The momentum could go to the next level.
ACWX seems to be the ETF to follow to keep intraday tabs on the I-fund. ACWX was down slightly yesterday after being down almost 1% on Friday. You can see that update by about 9:15 PM ET here: https://www.tsptalk.com/tsp_share_prices.php
The bond market was closed on Monday but BND (Bonds / F-fund) traded down a bit after Friday's rally.
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.html
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.
