It was a very sluggish day for stocks on Tuesday, but as we have seen often in recent weeks, one or two indices buck the trend and outperform. Yesterday was the small caps turn to take the ball and run. On a day that saw the Dow fall 104-points, and the Nasdaq and S&P close also close with modest losses, the small caps bounced back from their awful day on Monday. The dollar was up, as were yields, and the Transports made new highs.
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The yield on the 10-year Treasury was up again, but closed well off its highs and made a possible double top.
Oil was down, and the dollar rallied, and that hasn't been the best set up for small caps recently, but nonetheless, they rallied strongly on Tuesday, so it seems like it may be more rotational, and perhaps some last minute rebalancing on the second to last day of the first quarter, although selling stocks and buying bonds had been that play this quarter. But here's oil and it is either making a bear flag, or that could be more of a rounded bottom of a consolidating base on the 50-day EMA. It probably needed a rest after rallying for almost 4 months.
There seems to be a lot to be worried about out there - excessive hedge fund leverage, rising bond yields, a COVID replay, etc., but as we know, the market generally likes to climb a wall of worry. There is a ton of liquidity and cheap money out there, the credit market looks solid, and the Fed has the market's back, so it's tough to be too bearish.
When we look at the charts we see some making new highs, like the all important Dow Transportation Index, which is may be one of the most economically sensitive indexes to watch...
And some lagging like small caps and the Nasdaq. How well can the broader market do if the high tech, high growth of the Nasdaq doesn't play along?
We also had record low percentage of up issues (advancers) on the NYSE on Monday while the S&P 500 was within 0.25% of a new highs. According to sentimenTrader.com, it was the lowest reading since 1946 in that situation, and looking out one month to one year, the returns on the S&P 500 were positive less than 50% of the time - so there is that.
Perhaps we are in a stock pickers / sector pickers market. Unfortunately our TSP funds aren't that specific. Yes, we have small and large caps, and the international fund, but what about being able to invest in the Transports when they are hot, or the energy of financial sectors which have been leading in recent months? Of course there are several other options, but the idea is likely a nonstarter because the only new funds we get out of the TSP are more L-funds which are nothing more than 10 different ways to distribute between the current 5 fund options we've had for the last 20 years. But I digress.
Friday is a market holiday but from what I'm seeing the March jobs report, which is normally scheduled on the first Friday of each month, may be released that day despite the holiday on Wall Street.
Because the market is closed on Friday, I won't be posting a market commentary that day.
March Madness contest links: More Info. Yahoo! Tourney Pick'em.
The S&P 500 (C-fund) posted an inside day where the low and high of the day fell within Monday's low and high. It's generally nothing to be concerned about in an uptrend, and it looks like the index is just digesting last Friday's giant rally. I didn't draw it in, but it almost looks like a small bull flag coming off the larger bull flag that has already broken out. What I did draw was the long term rising channel (blue) and prior double tops that eventually broke out (red), although some backed off quickly after a breakout.
The DWCPF (small caps / S-fund) led on the upside yesterday and this chart is a little puzzling considering the S&P 500 is right near its all time highs. We have a possible higher low forming, but it is still below the 50-day EMA and any more downside from this point could create a lower low. Ideally, yesterday's rally resumes today and pushes the index back above the 50-day EMA, but if that doesn't happen, it could get bad.
The EFA (I-Fund) drifted lower consolidating Friday's big gain and trying to fill in that small open gap near 75.60. Nothing too worrisome here unless it pushes down toward the prior low without first making a higher high.
The dollar was up sharply yesterday putting pressure on almost everything - although surprisingly not the small caps. It broke above the top of the rising channel, but like the breakdown below it in February, it could just be a temporary overshooting. It has closed above the 200-day EMA for two straight days so a couple more would make it interesting.
BND (bonds / F-fund) was up despite the move higher in bond yields, and I believe part of that gain came after the bond market had closed. BND does trade after the bond market closes since it is an ETF traded on the stock exchange. It could mean that the bond futures moved higher (yields lower) after the bond market closed.
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 notifications when we post new commentary, sign up HERE.
Thanks 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 yield on the 10-year Treasury was up again, but closed well off its highs and made a possible double top.
Oil was down, and the dollar rallied, and that hasn't been the best set up for small caps recently, but nonetheless, they rallied strongly on Tuesday, so it seems like it may be more rotational, and perhaps some last minute rebalancing on the second to last day of the first quarter, although selling stocks and buying bonds had been that play this quarter. But here's oil and it is either making a bear flag, or that could be more of a rounded bottom of a consolidating base on the 50-day EMA. It probably needed a rest after rallying for almost 4 months.
There seems to be a lot to be worried about out there - excessive hedge fund leverage, rising bond yields, a COVID replay, etc., but as we know, the market generally likes to climb a wall of worry. There is a ton of liquidity and cheap money out there, the credit market looks solid, and the Fed has the market's back, so it's tough to be too bearish.
When we look at the charts we see some making new highs, like the all important Dow Transportation Index, which is may be one of the most economically sensitive indexes to watch...
And some lagging like small caps and the Nasdaq. How well can the broader market do if the high tech, high growth of the Nasdaq doesn't play along?
We also had record low percentage of up issues (advancers) on the NYSE on Monday while the S&P 500 was within 0.25% of a new highs. According to sentimenTrader.com, it was the lowest reading since 1946 in that situation, and looking out one month to one year, the returns on the S&P 500 were positive less than 50% of the time - so there is that.
Perhaps we are in a stock pickers / sector pickers market. Unfortunately our TSP funds aren't that specific. Yes, we have small and large caps, and the international fund, but what about being able to invest in the Transports when they are hot, or the energy of financial sectors which have been leading in recent months? Of course there are several other options, but the idea is likely a nonstarter because the only new funds we get out of the TSP are more L-funds which are nothing more than 10 different ways to distribute between the current 5 fund options we've had for the last 20 years. But I digress.
Friday is a market holiday but from what I'm seeing the March jobs report, which is normally scheduled on the first Friday of each month, may be released that day despite the holiday on Wall Street.
Because the market is closed on Friday, I won't be posting a market commentary that day.
March Madness contest links: More Info. Yahoo! Tourney Pick'em.
The S&P 500 (C-fund) posted an inside day where the low and high of the day fell within Monday's low and high. It's generally nothing to be concerned about in an uptrend, and it looks like the index is just digesting last Friday's giant rally. I didn't draw it in, but it almost looks like a small bull flag coming off the larger bull flag that has already broken out. What I did draw was the long term rising channel (blue) and prior double tops that eventually broke out (red), although some backed off quickly after a breakout.
The DWCPF (small caps / S-fund) led on the upside yesterday and this chart is a little puzzling considering the S&P 500 is right near its all time highs. We have a possible higher low forming, but it is still below the 50-day EMA and any more downside from this point could create a lower low. Ideally, yesterday's rally resumes today and pushes the index back above the 50-day EMA, but if that doesn't happen, it could get bad.
The EFA (I-Fund) drifted lower consolidating Friday's big gain and trying to fill in that small open gap near 75.60. Nothing too worrisome here unless it pushes down toward the prior low without first making a higher high.
The dollar was up sharply yesterday putting pressure on almost everything - although surprisingly not the small caps. It broke above the top of the rising channel, but like the breakdown below it in February, it could just be a temporary overshooting. It has closed above the 200-day EMA for two straight days so a couple more would make it interesting.
BND (bonds / F-fund) was up despite the move higher in bond yields, and I believe part of that gain came after the bond market had closed. BND does trade after the bond market closes since it is an ETF traded on the stock exchange. It could mean that the bond futures moved higher (yields lower) after the bond market closed.
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 notifications when we post new commentary, sign up HERE.
Thanks 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.
