The Nasdaq hit 20,000 for the first time and it is leading the indices higher again. Stocks bounced back on the day that bitcoin made its move back above $100,000. So, is the dog wagging the tail or the tail wagging the dog? We thought the dips would be bought quickly, but we'll have to see if it for real. The Dow was actually down 99-points, and small caps bounced back as well so once again it's been difficult get all of the indices up on the same day. Bonds were down as yields move up after the CPI report.
There was some late selling yesterday, which isn't the best set up for the following day and perhaps it was just some profit taking as we certainly have some nerves in the market as valuations get extreme and some sign that inflation is indeed getting sticky. But with bitcoin back above 100K, investors see to be in the mood to take on risk.
Despite the nice gains almost broadly, breadth was only slightly positive on the NYSE, and a little better on the Nasdaq. Trading volume was actually negative on the NYSE, but thanks to large caps, the Nasdaq breadth was strong. The 137 new lows on the Nasdaq is a little eye opening on the day it hit 20,000 for the first time ever.
Yesterday's CPI came in inline with estimates and the stock market appreciated that, but it isn't showing much progress on inflation as the numbers are not all moving in the right direction anymore.
From briefing.com: The total year-over-year CPI rate was up 2.7%, versus 2.6% in October. The year-over-year Core CPI, which excludes food and energy, was up 3.3%, unchanged from October.
The Fed is looking for a 2% inflation target and it hasn't been getting any closer to that number.
The red arrows below are CPI items that moved up more than they did the month before. That's not just that inflation went up - they ALL went up except Education and Communication. The red arrows mean they went up faster than in October. The green arrows show where the item went up as well, but they went up slower than in October. The blue arrows went up, but at the same pace as October. Red is winning.
This is actually a reason for the Fed to stop rate cuts, yet surprisingly the chances of an interest rate cut at next week's meeting went up to 98.6%.
I think investors must have been expecting higher inflation numbers than came in, which is why stocks rallied, and those odds of a cut went up. But I have a feeling that at next week's FOMC meeting, the Fed could start getting serious about a pause in rate cuts next year until inflation is moving near 2.5% with their goal being 2%.
The bond market thought the CPI was inflationary as yields moved higher, and now the downtrend in yields has been broken. Range bound? Filling in the gap? Going higher? I don't know, but we'd prefer to see this move up on strong economic data that isn't inflationary, and the later may be tough to do if the Fed keeps cutting.
Economic concerns aside, momentum and charts tell us a better story and the two charts below look promising for the tech sector. The Semiconductor sector is trying to bounce off its 200-day EMA again, and while this chart doesn't go back that far, the high on this is 280, so there is room to run higher if that average can continue to hold as support.
The chart above is the Magnificent 7 ETF and after the negative reversal day on Tuesday, the MAGS bounced right back with authority, helping the Nasdaq to also move to new highs. This doesn't look like a chart worried about inflation, valuations, or anything for that matter, so any day of reckoning is still down the road.
The PPI Producer Prices report comes in this morning (Thursday) and the bulls are hoping it tells the same story as the CPI. That is, come in with no surprises.
The S&P 500 (C-fund) was up nicely yesterday and the chart formation looks good, but there is a lot of resistance overhead. How much strength does the S&P 500 have left? If that Semiconductor chart up above is any indication that they are ready to rally, then the resistance here may be futile. Support continues to hold, and the PMO indicator looks like it's trying to do another touch and go.
DWCPF (S-fund) rallied nicely after holding at the 20-day EMA support, but you can see some old broken support (red dashed line) may become resistance, although that line is rising every day.
ACWX (The I-fund tracking index) was up 0.51% yesterday, and the I-fund was given 0.46% so the 50-day EMA did hold on its first pullback test. You can see the updated I-fund and other TSP share prices and returns, usually posted daily by 8:30 PM ET here: https://www.tsptalk.com/tsp_share_prices.php
BND (bonds / F-fund) put in an ugly negative outside reversal yesterday, which could mean more downside to at least the rising support line and moving averages. Is this telling us that today's PPI report is expected to be a little hot?
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.
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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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There was some late selling yesterday, which isn't the best set up for the following day and perhaps it was just some profit taking as we certainly have some nerves in the market as valuations get extreme and some sign that inflation is indeed getting sticky. But with bitcoin back above 100K, investors see to be in the mood to take on risk.
Despite the nice gains almost broadly, breadth was only slightly positive on the NYSE, and a little better on the Nasdaq. Trading volume was actually negative on the NYSE, but thanks to large caps, the Nasdaq breadth was strong. The 137 new lows on the Nasdaq is a little eye opening on the day it hit 20,000 for the first time ever.
Yesterday's CPI came in inline with estimates and the stock market appreciated that, but it isn't showing much progress on inflation as the numbers are not all moving in the right direction anymore.
From briefing.com: The total year-over-year CPI rate was up 2.7%, versus 2.6% in October. The year-over-year Core CPI, which excludes food and energy, was up 3.3%, unchanged from October.
The Fed is looking for a 2% inflation target and it hasn't been getting any closer to that number.
The red arrows below are CPI items that moved up more than they did the month before. That's not just that inflation went up - they ALL went up except Education and Communication. The red arrows mean they went up faster than in October. The green arrows show where the item went up as well, but they went up slower than in October. The blue arrows went up, but at the same pace as October. Red is winning.
This is actually a reason for the Fed to stop rate cuts, yet surprisingly the chances of an interest rate cut at next week's meeting went up to 98.6%.
I think investors must have been expecting higher inflation numbers than came in, which is why stocks rallied, and those odds of a cut went up. But I have a feeling that at next week's FOMC meeting, the Fed could start getting serious about a pause in rate cuts next year until inflation is moving near 2.5% with their goal being 2%.
The bond market thought the CPI was inflationary as yields moved higher, and now the downtrend in yields has been broken. Range bound? Filling in the gap? Going higher? I don't know, but we'd prefer to see this move up on strong economic data that isn't inflationary, and the later may be tough to do if the Fed keeps cutting.
Economic concerns aside, momentum and charts tell us a better story and the two charts below look promising for the tech sector. The Semiconductor sector is trying to bounce off its 200-day EMA again, and while this chart doesn't go back that far, the high on this is 280, so there is room to run higher if that average can continue to hold as support.
The chart above is the Magnificent 7 ETF and after the negative reversal day on Tuesday, the MAGS bounced right back with authority, helping the Nasdaq to also move to new highs. This doesn't look like a chart worried about inflation, valuations, or anything for that matter, so any day of reckoning is still down the road.
The PPI Producer Prices report comes in this morning (Thursday) and the bulls are hoping it tells the same story as the CPI. That is, come in with no surprises.
The S&P 500 (C-fund) was up nicely yesterday and the chart formation looks good, but there is a lot of resistance overhead. How much strength does the S&P 500 have left? If that Semiconductor chart up above is any indication that they are ready to rally, then the resistance here may be futile. Support continues to hold, and the PMO indicator looks like it's trying to do another touch and go.
DWCPF (S-fund) rallied nicely after holding at the 20-day EMA support, but you can see some old broken support (red dashed line) may become resistance, although that line is rising every day.
ACWX (The I-fund tracking index) was up 0.51% yesterday, and the I-fund was given 0.46% so the 50-day EMA did hold on its first pullback test. You can see the updated I-fund and other TSP share prices and returns, usually posted daily by 8:30 PM ET here: https://www.tsptalk.com/tsp_share_prices.php
BND (bonds / F-fund) put in an ugly negative outside reversal yesterday, which could mean more downside to at least the rising support line and moving averages. Is this telling us that today's PPI report is expected to be a little hot?
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.php
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.
