Stocks opened higher on Monday but it was a very choppy and flat day for the big three indices yesterday, but small caps bucked that trend and rallied nicely, despite another push higher in yields. The action wasn't great for the large caps as dip buyer were met with profit takers and perhaps people like me who saw Thursday's action as a possible warning sign. Bonds were down again on the higher yields, and the I-fund was up on a weaker dollar.
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I think yesterday was more of a place holder and a day for the bulls and bears to do battle and it was mostly a standoff, although as I mentioned the small caps did well. The S&P 500 did have some technical damage done last week and if the comparison to the July 2023 negative outside reversal peak is going to continue, we could see another choppy sideways day again today in the S&P. During that July 2023 reversal peak, the S&P 500 came back to nearly regain all of the loss from that reversal day, but that's when the investors who got their money back from that day, decided it was time to sell, or at least stop buying.
Here we are again and the 5230 - 5240 area could be where investors are just happy to get those losses back.
I may be making a bigger deal of that than it is, but large negative (or positive) outside reversal days usually have more meaning behind them than just a down or up day.
The 10-year Treasury Yield formed a classic looking inverted head and shoulder pattern, and it eventually broke to the upside as a chartists expect, and then the neckline should provide support on any pullback, which it basically did so far. So, the textbooks tell us we should see even higher yields in the weeks ahead. That's not good for the F-fund.
The dollar is also on the rise, despite yesterday's dip. It too broke out to the upside, came back to retest the breakout area, and now we have a bull flag flying high, and again the textbooks suggests a stronger dollar is coming.
Oil is above $86 a barrel and you can see what has been happening to the price of oil this year. I'm sure you are feeling it at the pump.
Ironically, higher oil prices tend to occur either seasonally, or when demand is higher, which is usually indicative of a stronger economy. On the other hand, the higher prices at the pump will impact the consumer negatively and thus the economy could suffer. I don't like the stock market's chances if oil stays near $85 - $90 a barrel.
Tomorrow we will get the CPI report before the opening bell, and the PPI, which has become even more of market mover then the CPI recently, comes out on Thursday.
The S&P 500 (C-fund) was flat yesterday and despite the pressure from the bears, it held above that firm 15-day EMA. That's good, but the bulls were not able to do much about adding onto Friday's rebound yet. Also, the 15-day EMA is now flattening out.
DWCPF (S-fund) had a good day, and the question I have had for weeks now is whether the S and I-funds, which had better looking charts than the C-fund because of the sideways consolidations which strengthens support, can continue to move higher if the S&P 500 falters. Yesterday was a sign that it might, but we have seen short stints like this a few times that led to small caps rolling over again, and if yields keep rising as it looks like they might, I don't know if they can outperform for too long. If yields come down it would be a different story.
The EFA (I-fund) also had a good day and perhaps the overseas market will not be as impacted by the the US interest rate dilemma? I don't know. The chart looks good if it can hold above that 30-day average in purple. However, the bull flag on the dollar chart looks like it is churning before a breakout, and that may not end well for the I-fund.
BND (Bonds / F-fund) was down and this chart is broken.
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
For more info our other premium services, please go here... www.tsptalk.com/premiums.html
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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 use additional methods and strategies to determine fund positions.
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I think yesterday was more of a place holder and a day for the bulls and bears to do battle and it was mostly a standoff, although as I mentioned the small caps did well. The S&P 500 did have some technical damage done last week and if the comparison to the July 2023 negative outside reversal peak is going to continue, we could see another choppy sideways day again today in the S&P. During that July 2023 reversal peak, the S&P 500 came back to nearly regain all of the loss from that reversal day, but that's when the investors who got their money back from that day, decided it was time to sell, or at least stop buying.
Here we are again and the 5230 - 5240 area could be where investors are just happy to get those losses back.
I may be making a bigger deal of that than it is, but large negative (or positive) outside reversal days usually have more meaning behind them than just a down or up day.
The 10-year Treasury Yield formed a classic looking inverted head and shoulder pattern, and it eventually broke to the upside as a chartists expect, and then the neckline should provide support on any pullback, which it basically did so far. So, the textbooks tell us we should see even higher yields in the weeks ahead. That's not good for the F-fund.
The dollar is also on the rise, despite yesterday's dip. It too broke out to the upside, came back to retest the breakout area, and now we have a bull flag flying high, and again the textbooks suggests a stronger dollar is coming.
Oil is above $86 a barrel and you can see what has been happening to the price of oil this year. I'm sure you are feeling it at the pump.
Ironically, higher oil prices tend to occur either seasonally, or when demand is higher, which is usually indicative of a stronger economy. On the other hand, the higher prices at the pump will impact the consumer negatively and thus the economy could suffer. I don't like the stock market's chances if oil stays near $85 - $90 a barrel.
Tomorrow we will get the CPI report before the opening bell, and the PPI, which has become even more of market mover then the CPI recently, comes out on Thursday.
The S&P 500 (C-fund) was flat yesterday and despite the pressure from the bears, it held above that firm 15-day EMA. That's good, but the bulls were not able to do much about adding onto Friday's rebound yet. Also, the 15-day EMA is now flattening out.
DWCPF (S-fund) had a good day, and the question I have had for weeks now is whether the S and I-funds, which had better looking charts than the C-fund because of the sideways consolidations which strengthens support, can continue to move higher if the S&P 500 falters. Yesterday was a sign that it might, but we have seen short stints like this a few times that led to small caps rolling over again, and if yields keep rising as it looks like they might, I don't know if they can outperform for too long. If yields come down it would be a different story.
The EFA (I-fund) also had a good day and perhaps the overseas market will not be as impacted by the the US interest rate dilemma? I don't know. The chart looks good if it can hold above that 30-day average in purple. However, the bull flag on the dollar chart looks like it is churning before a breakout, and that may not end well for the I-fund.
BND (Bonds / F-fund) was down and this chart is broken.
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
For more info our other premium services, please go here... www.tsptalk.com/premiums.html
Daily Market Commentary Archives
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 use additional methods and strategies to determine fund positions.
