Stocks bounced back from the one day pullback yesterday, and the rebound off the lows seems to be unstoppable - at least while the S&P nears the recent highs. That was in spite of the dramatic negative jobs revisions they announced, as we talked about this yesterday. Yields and the dollar were down again, as was oil, so the signs of a potential economic slowdown are being overshadowed by the this fodder for Fed rate cuts.
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The stock market basically ignored the 818,000 negative revision in the jobs gains that was announced yesterday. I could say a lot about this, as I have been talking about the steady negative revisions we have seen in almost every monthly jobs report over the last year or two, but in reality this is rear-view mirror data. The 818K reduction were for the months of April 2023 thru March of 2024.
But what's meaningful is that the Fed was using the strong labor market as the reason it has not needed to cut interest rates, but that negative revision means an average of 65,000 fewer jobs were created every month for a year, than was reported. They did the same thing the prior year with another 800,000 - at least, over reported jobs.
While I don't claim to know anything more than anyone else on this stuff - I probably know less about how it works. But what rubs me the wrong way is that every revision is down, meaning all of these monthly jobs reports are always over reported - usually beating estimates, the stock market tends to rally, and it turns out that it's all smoke and mirrors. We don't know that at the time (although I keep mentioning it) but someone knows the truth and I'm sure it's not small money investors like us. Again, this is old data but it just feels like we are constantly being manipulated.
The 10-year Treasury Yield actually closed at its lowest level since July of 2023, although it still has room to fall to reach that August 5 intraday low.
The dollar and even oil continue to decline so the action outside of the stock market is certainly showing more concern about the economy than the stocks market is, which is all about what the Fed is going to do instead - and that's actually a good reason for stocks to be rallying, if you don't mind a slowdown in the economy.
Ok, to change directions here, we all remember the mini-market crash from way back in early August. Seems like investors have forgotten all about it already, but it was the unwinding of the Yen carry trade that helped trigger the whole move down.
Anyway, this is something that was said the day after the low was put in the S&P 500 regarding that Yen carry trade:
"The recent unwinding in carry trades has more room to run as the yen remains one of the most undervalued currencies, according to JPMorgan Chase & Co."
And, “We are not done by any stretch,” Arindam Sandilya, co-head of global FX strategy, said on Bloomberg TV. “The carry trade unwind, at least within the speculative investing community, is somewhere between 50%-60% complete.”
Despite that, stocks have already recovered all of the losses, so is there another shoe to drop?
Source: [url]https://www.bloomberg.com/news/articles/2024-08-06/jpmorgan-says-carry-trade-unwind-is-only-half-complete
[/URL]
So what has Japan's Nikkei stock market done since then? It's up quite a bit like the US market, but I see that it is now testing its falling 50-day EMA, and some other possible resistance in the area. The key is, what happens to the US stock market if Japan rolls over again here at resistance?
I sound a lot more bearish than I actually am, or than I am allocated, but I am concerned that if this rebound off the lows was going to run out of steam soon, we have enough news flaw to be a catalyst for another pause or pullback.
The Weekly Jobless Claims come out early this morning and Jerome Powell will speak at the Jackson Hole Symposium on Friday, which could be a market mover.
The S&P 500 (C-fund) was up on Wednesday, filing in the obvious part of the open gap (blue) from mid-July, but technically the top of the open gap is at the July 16 close, which is the top of red box above 5650. We could have a double top pullback but we have a lot of catalyses on the table that could push or pull these charts in either direction in the short term. However, some kind of a pullback is surely due, if the forces of the imminent September rate cut doesn't distort the normal market gyrations.
The DWCPF (S-fund) held nicely at that old resistance line, so the 1% loss on Tuesday was just some kind of test of that new support. It could have easily pulled back to fill that large open gap, but buyers stepped up again instead.
The EFA (I-fund) is really taking advantage of the dollar, which is breaking down, and picking up some speed in recent days.
BND (F-fund) continued its rallying ways although it stalled at the double top after retracing the break down candlestick from earlier this month. We also see one of those "indecision" spinning top formations that could be leaning toward some kind of change in direction, but again the Fed could change everything on Friday.
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.html
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.
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The stock market basically ignored the 818,000 negative revision in the jobs gains that was announced yesterday. I could say a lot about this, as I have been talking about the steady negative revisions we have seen in almost every monthly jobs report over the last year or two, but in reality this is rear-view mirror data. The 818K reduction were for the months of April 2023 thru March of 2024.
But what's meaningful is that the Fed was using the strong labor market as the reason it has not needed to cut interest rates, but that negative revision means an average of 65,000 fewer jobs were created every month for a year, than was reported. They did the same thing the prior year with another 800,000 - at least, over reported jobs.
While I don't claim to know anything more than anyone else on this stuff - I probably know less about how it works. But what rubs me the wrong way is that every revision is down, meaning all of these monthly jobs reports are always over reported - usually beating estimates, the stock market tends to rally, and it turns out that it's all smoke and mirrors. We don't know that at the time (although I keep mentioning it) but someone knows the truth and I'm sure it's not small money investors like us. Again, this is old data but it just feels like we are constantly being manipulated.
The 10-year Treasury Yield actually closed at its lowest level since July of 2023, although it still has room to fall to reach that August 5 intraday low.
The dollar and even oil continue to decline so the action outside of the stock market is certainly showing more concern about the economy than the stocks market is, which is all about what the Fed is going to do instead - and that's actually a good reason for stocks to be rallying, if you don't mind a slowdown in the economy.
Ok, to change directions here, we all remember the mini-market crash from way back in early August. Seems like investors have forgotten all about it already, but it was the unwinding of the Yen carry trade that helped trigger the whole move down.
Anyway, this is something that was said the day after the low was put in the S&P 500 regarding that Yen carry trade:
"The recent unwinding in carry trades has more room to run as the yen remains one of the most undervalued currencies, according to JPMorgan Chase & Co."
And, “We are not done by any stretch,” Arindam Sandilya, co-head of global FX strategy, said on Bloomberg TV. “The carry trade unwind, at least within the speculative investing community, is somewhere between 50%-60% complete.”
Despite that, stocks have already recovered all of the losses, so is there another shoe to drop?
Source: [url]https://www.bloomberg.com/news/articles/2024-08-06/jpmorgan-says-carry-trade-unwind-is-only-half-complete
[/URL]
So what has Japan's Nikkei stock market done since then? It's up quite a bit like the US market, but I see that it is now testing its falling 50-day EMA, and some other possible resistance in the area. The key is, what happens to the US stock market if Japan rolls over again here at resistance?
I sound a lot more bearish than I actually am, or than I am allocated, but I am concerned that if this rebound off the lows was going to run out of steam soon, we have enough news flaw to be a catalyst for another pause or pullback.
The Weekly Jobless Claims come out early this morning and Jerome Powell will speak at the Jackson Hole Symposium on Friday, which could be a market mover.
The S&P 500 (C-fund) was up on Wednesday, filing in the obvious part of the open gap (blue) from mid-July, but technically the top of the open gap is at the July 16 close, which is the top of red box above 5650. We could have a double top pullback but we have a lot of catalyses on the table that could push or pull these charts in either direction in the short term. However, some kind of a pullback is surely due, if the forces of the imminent September rate cut doesn't distort the normal market gyrations.
The DWCPF (S-fund) held nicely at that old resistance line, so the 1% loss on Tuesday was just some kind of test of that new support. It could have easily pulled back to fill that large open gap, but buyers stepped up again instead.
The EFA (I-fund) is really taking advantage of the dollar, which is breaking down, and picking up some speed in recent days.
BND (F-fund) continued its rallying ways although it stalled at the double top after retracing the break down candlestick from earlier this month. We also see one of those "indecision" spinning top formations that could be leaning toward some kind of change in direction, but again the Fed could change everything on Friday.
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.html
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.
