The melt-down continued as a morning rallied failed again on Thursday. The S&P 500 was positive as late as 1:20 ET and then they pulled the plug on the attempted rally. Something has changed this month and the way it flipped as soon as the calendar turned to August is a little suspicious, but we did come into the month knowing August and September can be sluggish. Yields were up again pushing bonds and the F-fund to an interesting low - maybe a short-term bottom?
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After a 5% pullback (4.5% actually) the odds of a snap back rally increase, but the bears seem to have taken control and the S&P 500 hasn't been up for two days in a row since July when finding a down day was tough. Someone flipped the switch and the melting action is concerning.
In a blink of an eye the S and I-funds have gone from 2023 highs down to testing their 200-day moving averages (EMAs.) My hunch is that this was done because the bears had capitulated and joined the bullish camp at some point in July, and now those coverts are selling, as are some of the bulls who did make money in recent months. I told you my sob story earlier this week and I won't bore you with that again, but let's just say I took the bait and they got me.
DWCPF (S-fund) is down sharply and nearing its 200-day EMA, with an open gap another 50+ points below. The longer term chart below shows that the 200-day EMA does have some precedence as a possible support level.
The S-fund never really threatened new highs, despite some decent gains in 2023. Now it is flirting with a break down and perhaps a test of the rising support line off the 2022 lows. Or again, perhaps it bounces off the 200-day EMA - if there is a catalyst to help out.
EFA (I-fund) also took the elevator down from its highs of the year down to the 200-day EMA with an open gap less than a point below that. This is probably the last straw for a bull market to try to catch a bid before we may have to start talking about a "bear market" again. That said, a precipitous decline doesn't usually mark an intermediate term low, but it can produce a meaningful relief rally in the short-term.
The Yield on the 10-year Treasury continues to climb as investors, who consistently dismissed the Fed's hawkish stance on inflation for months, are starting to believe again. The double top would be a good place to see a pullback and perhaps help bonds - and stocks - bounce, but the overall picture is getting more bleak.
I don't want to sound too bearish because the market is probably ripe for a playable relief rally, but the buy and holders may want to buckle up. Some kind of shift is occurring and that may be turning this market from a buy the dips environment, to a sell the rips situation. It's on the borderline now with the near 5% loss.
It is options expiration week and today is expiration day. Historically this week had a bullish bias but the bearish action has mocked that tendency, but there is also a tendency to see the week after options week, do some reversing of the prior week. In this case the negative options week could ignite a post options relief rally. But be careful. Like bull markets that never seem to come down, melting markets tend to go down longer and further than we expect as well.
The S&P 500 (C-fund) continues its slide, cutting through support without much effort this week, and eying another layer of support near 4325. This near 5% pullback could either exhaust itself out, or drive toward a 10% correction, but either way look for a big snap back rally or two to test us. Are you a seller of rallies or buying down at lower support? Make your plan because one or both of those are possible in the coming days and it's better to have an emotionless plan in place, rather than make a decision while stocks are swinging widely before the IFT deadline.
BND (Bonds / F-fund) may be ready for a relief rally as well and it is possible that it happens while stocks are still falling, but if yields come down (bonds prices up) we should see a bounce in stocks as well. Again the question will be whether to sell the rally in stocks and / or bonds if they do bounce.
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.
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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After a 5% pullback (4.5% actually) the odds of a snap back rally increase, but the bears seem to have taken control and the S&P 500 hasn't been up for two days in a row since July when finding a down day was tough. Someone flipped the switch and the melting action is concerning.
In a blink of an eye the S and I-funds have gone from 2023 highs down to testing their 200-day moving averages (EMAs.) My hunch is that this was done because the bears had capitulated and joined the bullish camp at some point in July, and now those coverts are selling, as are some of the bulls who did make money in recent months. I told you my sob story earlier this week and I won't bore you with that again, but let's just say I took the bait and they got me.
DWCPF (S-fund) is down sharply and nearing its 200-day EMA, with an open gap another 50+ points below. The longer term chart below shows that the 200-day EMA does have some precedence as a possible support level.
The S-fund never really threatened new highs, despite some decent gains in 2023. Now it is flirting with a break down and perhaps a test of the rising support line off the 2022 lows. Or again, perhaps it bounces off the 200-day EMA - if there is a catalyst to help out.
EFA (I-fund) also took the elevator down from its highs of the year down to the 200-day EMA with an open gap less than a point below that. This is probably the last straw for a bull market to try to catch a bid before we may have to start talking about a "bear market" again. That said, a precipitous decline doesn't usually mark an intermediate term low, but it can produce a meaningful relief rally in the short-term.
The Yield on the 10-year Treasury continues to climb as investors, who consistently dismissed the Fed's hawkish stance on inflation for months, are starting to believe again. The double top would be a good place to see a pullback and perhaps help bonds - and stocks - bounce, but the overall picture is getting more bleak.
I don't want to sound too bearish because the market is probably ripe for a playable relief rally, but the buy and holders may want to buckle up. Some kind of shift is occurring and that may be turning this market from a buy the dips environment, to a sell the rips situation. It's on the borderline now with the near 5% loss.
It is options expiration week and today is expiration day. Historically this week had a bullish bias but the bearish action has mocked that tendency, but there is also a tendency to see the week after options week, do some reversing of the prior week. In this case the negative options week could ignite a post options relief rally. But be careful. Like bull markets that never seem to come down, melting markets tend to go down longer and further than we expect as well.
The S&P 500 (C-fund) continues its slide, cutting through support without much effort this week, and eying another layer of support near 4325. This near 5% pullback could either exhaust itself out, or drive toward a 10% correction, but either way look for a big snap back rally or two to test us. Are you a seller of rallies or buying down at lower support? Make your plan because one or both of those are possible in the coming days and it's better to have an emotionless plan in place, rather than make a decision while stocks are swinging widely before the IFT deadline.
BND (Bonds / F-fund) may be ready for a relief rally as well and it is possible that it happens while stocks are still falling, but if yields come down (bonds prices up) we should see a bounce in stocks as well. Again the question will be whether to sell the rally in stocks and / or bonds if they do bounce.
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.
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.
