It was another whippy day for stocks on Thursday after a better than expected jobless claims report and an interest rate hike from the European Central Bank (ECB) sent stocks lower, but the oversold bounce fought through the headlines and stocks managed a respectable gain on the day. The Dow gained 193-points and the big three indices all gained about 0.6%, while small caps led with a gain of over 1%. Bonds were down as yields ticked up after Wednesday's decline.
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The market was certainly oversold after the recent 10% decline, and now the market is bracing itself for another 0.75% interest rate hike from the Fed later this month. With the next CPI report coming out on September 13 and expectation of some inflation relief from that report, there could be a small window of opportunity for a relief rally in stocks as well leading up to that report.
The 13th is next Tuesday so it is a small window unless you expect more a more bullish reaction after the report and perhaps even up to the Fed rate hike which will be on September 21. I feel like that could be risky to go out that far because if we get some continued upside in the coming days, the charts may not have the benefit of being as oversold as it was just a couple of days, and that could turn off the program buying.
For the buy and holder, well you may not even be reading this because, why would you? You will likely stay your course and accept whatever the market dishes out to you. I doubt it will be as bad as the financial crisis or dot com bear market (Nasdaq lost 78% in that one), but losing another 20-30% in this bear market is not out of the question. Maybe not probably, but possible, and things tend to go further than we ever anticipate.
On the other hand market timers do have the opportunity that comes maybe once a decade - unless you throw in a pandemic in there. That is, a bear market where you can try to protect your capital, hold some cash, and attempt to buy at lower prices. It's never as easy as that sounds, and it can backfire, but this is what timers are usually looking for.
The defensive thing to do is take what this recent rebound has given us, but the more aggressive investor / market timer might wait for the CPI or Fed later this month. Of course every day that you are in the market is another day that they could try to take your gains back from you.
The 10-Year Treasury and the dollar were both up modestly yesterday after the European Central Bank raised their interest rates 0.75%. Headlines like that move the market in the short term but it rarely changes the direction that stocks are eventually going. It just adds a level of noise.
I am not bullish on stocks but as our TSP Talk Plus subscribers know, we did play for a bounce this week, and so far so good, but I really don't want to give those gains back. It could be a mistake, but if my theory of more bearishness and a potential test of the lows plays out, how nice would it be to lock in a 1 to maybe 3% gain for the month of September? That said it rarely plays out exactly as we hope, so I'll take what I can get.
The price of oil rebounded yesterday but that is coming off the lowest prices since January. The trend is down and lower prices have been a product of the weakening economic activity, but that may be what is keeping the market from free falling right now. If we do start seeing oil head back up, then I'd really want to be playing defense.
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) followed through on Wednesday's rally by tacking on another 0.66% yesterday. This is not a surprise even though it feels like it after three weeks of nearly straight down action. But, relief rallies don't usually last very long unless it turns into a bear market rally, which we just experienced, so I am skeptical that we could see another so quickly. I would say a relief rally would last days and a bear market rally could last weeks or months.
That long negative candlestick from August 26 may be one of the targets - to climb up and retrace some of that, but it would have to get back above the 50-day EMA to do that, and I'm not sure this market can do that without a catalyst. Maybe next week's CPI will do it, but that's just a maybe. Too many people are expecting a good number there.
The DWCPF (S-fund / small caps) led the way higher for the stock market on Thursday but look at all the resistance between 1700 and about 1720. That could take some work to best those numbers.
EFA (I-fund) was up slightly after the ECB raised interest rates in Europe. It's off its recent low, but not by much. Feels like a dead cat bounce for now, and anything above 62 should be tough.
The BND (Bonds / F-fund) was down again as yields moved up. That's been the trend but as we have seen in both stocks and bonds, charts don't tend to go straight down (or up) for very long without the occasional relief in the other direction.
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. Have a great weekend!
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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[TD="width: 338, align: center"] Daily TSP Funds Return
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[/TR]
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The market was certainly oversold after the recent 10% decline, and now the market is bracing itself for another 0.75% interest rate hike from the Fed later this month. With the next CPI report coming out on September 13 and expectation of some inflation relief from that report, there could be a small window of opportunity for a relief rally in stocks as well leading up to that report.
The 13th is next Tuesday so it is a small window unless you expect more a more bullish reaction after the report and perhaps even up to the Fed rate hike which will be on September 21. I feel like that could be risky to go out that far because if we get some continued upside in the coming days, the charts may not have the benefit of being as oversold as it was just a couple of days, and that could turn off the program buying.
For the buy and holder, well you may not even be reading this because, why would you? You will likely stay your course and accept whatever the market dishes out to you. I doubt it will be as bad as the financial crisis or dot com bear market (Nasdaq lost 78% in that one), but losing another 20-30% in this bear market is not out of the question. Maybe not probably, but possible, and things tend to go further than we ever anticipate.
On the other hand market timers do have the opportunity that comes maybe once a decade - unless you throw in a pandemic in there. That is, a bear market where you can try to protect your capital, hold some cash, and attempt to buy at lower prices. It's never as easy as that sounds, and it can backfire, but this is what timers are usually looking for.
The defensive thing to do is take what this recent rebound has given us, but the more aggressive investor / market timer might wait for the CPI or Fed later this month. Of course every day that you are in the market is another day that they could try to take your gains back from you.
The 10-Year Treasury and the dollar were both up modestly yesterday after the European Central Bank raised their interest rates 0.75%. Headlines like that move the market in the short term but it rarely changes the direction that stocks are eventually going. It just adds a level of noise.
I am not bullish on stocks but as our TSP Talk Plus subscribers know, we did play for a bounce this week, and so far so good, but I really don't want to give those gains back. It could be a mistake, but if my theory of more bearishness and a potential test of the lows plays out, how nice would it be to lock in a 1 to maybe 3% gain for the month of September? That said it rarely plays out exactly as we hope, so I'll take what I can get.
The price of oil rebounded yesterday but that is coming off the lowest prices since January. The trend is down and lower prices have been a product of the weakening economic activity, but that may be what is keeping the market from free falling right now. If we do start seeing oil head back up, then I'd really want to be playing defense.
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) followed through on Wednesday's rally by tacking on another 0.66% yesterday. This is not a surprise even though it feels like it after three weeks of nearly straight down action. But, relief rallies don't usually last very long unless it turns into a bear market rally, which we just experienced, so I am skeptical that we could see another so quickly. I would say a relief rally would last days and a bear market rally could last weeks or months.
That long negative candlestick from August 26 may be one of the targets - to climb up and retrace some of that, but it would have to get back above the 50-day EMA to do that, and I'm not sure this market can do that without a catalyst. Maybe next week's CPI will do it, but that's just a maybe. Too many people are expecting a good number there.
The DWCPF (S-fund / small caps) led the way higher for the stock market on Thursday but look at all the resistance between 1700 and about 1720. That could take some work to best those numbers.
EFA (I-fund) was up slightly after the ECB raised interest rates in Europe. It's off its recent low, but not by much. Feels like a dead cat bounce for now, and anything above 62 should be tough.
The BND (Bonds / F-fund) was down again as yields moved up. That's been the trend but as we have seen in both stocks and bonds, charts don't tend to go straight down (or up) for very long without the occasional relief in the other direction.
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. Have a great weekend!
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.
