Stocks opened modestly higher yesterday and initially started to fade as we have seen repeatedly lately. But as the day wore on the bulls took control, and this time the bears stepped aside as we head into today's important Fed policy statement and decision on interest rates. The Dow gained 599-points and we saw gains in the major indices near 2% and up to almost 3%. Yields were up, but surprisingly so was the BND bond fund.
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The S&P 500 (C-fund) gained over 2% again yesterday so the wild swings continue. There's a lot of talk of the 50 and 200 day moving averages crossing, and this is called a death cross because it tends to mean trouble for the intermediate term. However in my experience, when it first crosses we seem to get decent short-term oversold rallies before it rolls over again. You can see that any attempt at a relief rally would be contesting some stubborn resistance.
The DWCPF (small caps / S-fund) lagged a bit yesterday and wasn't the explosive fund that it was during last week's rally. Interest rates tend to put more pressure on smaller companies, although the small regional banks can do well. Also, the price of oil falling hurts some of the oil refinery companies in the small cap index.
The EFA (I-fund) has been consolidating sideways since the snap back rally last week, and it has been holding within that large gap area, which has basically been filled, but it is now up again resistance. Is this another roadblock, or can it gap above it?
BND (Bonds / F-fund) was actually up yesterday, but I'll be honest, I don't know why. The 2, 10, and 30 year bond yields were all up, which usually means bond prices (F-fund) are down. Not yesterday.
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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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The Fed's 2-day FOMC meeting starts today with the policy statement being announced on Wednesday at about 2 PM ET. Right now the market is pricing in a 98.3% probability of a 0.25% interest rate increase, with a tiny chance of a 0.50% hike.
The bond market has done a good job of preparing the stock market for this as the yield on the 10-year has gone from about 1% a year ago, to near 2.2% today.
The price of oil is one of the key catalysts for stocks right now and the 6.4% decline yesterday was just what the market ordered as it fell to $96 a barrel yesterday, off the $130 high that we saw earlier in the month. The 20-day EMA held on Monday and yesterday if fell through it but we did get a bit of a bounce off the 50-day EMA which is near $94. That's some strong support so we may want to be on the lookout for a bounce here, which could negatively impact the stocks market, but of course all eyes will be on the Fed today.
I mentioned the Transports the other day as they flirt with the neckline of its inverted head and shoulders pattern. Being one the market leaders, a breakout to the upside, which is very possible out of an inverted H&S, could be a bullish signal for the rest of the market. But it must breakout first because H&S patterns can be continuation patterns and they tend to eventually go in the direction of the larger trend, which happens to be down, so this is a key spot.
This is a very rough market right now and the trend is down so we should not assume too much bullishness despite some short term indications that we could see a rally. History suggests that the best market rallies tend to come during bear markets. Just look at this list of the all time one day gains for the S&P 500. 1929, 1930's, 1987, 2008, 2020 - all years with some of the worst bear markets of the last century.
So, stay vigilant because the worst may not be over, but that doesn't mean there won't be opportunities. The tough part is selling a giant rally because you hate to miss out on big gains, but bear market rallies don't last very long (although some do) and often it's best to sell them.
Admin Note: March Madness is starting! Free Contest with Prizes for winners.
More info: https://www.tsptalk.com/mb/site-news-and-announcements/38581-march-madness-contest-2022-a.html
The bond market has done a good job of preparing the stock market for this as the yield on the 10-year has gone from about 1% a year ago, to near 2.2% today.
The price of oil is one of the key catalysts for stocks right now and the 6.4% decline yesterday was just what the market ordered as it fell to $96 a barrel yesterday, off the $130 high that we saw earlier in the month. The 20-day EMA held on Monday and yesterday if fell through it but we did get a bit of a bounce off the 50-day EMA which is near $94. That's some strong support so we may want to be on the lookout for a bounce here, which could negatively impact the stocks market, but of course all eyes will be on the Fed today.
I mentioned the Transports the other day as they flirt with the neckline of its inverted head and shoulders pattern. Being one the market leaders, a breakout to the upside, which is very possible out of an inverted H&S, could be a bullish signal for the rest of the market. But it must breakout first because H&S patterns can be continuation patterns and they tend to eventually go in the direction of the larger trend, which happens to be down, so this is a key spot.
This is a very rough market right now and the trend is down so we should not assume too much bullishness despite some short term indications that we could see a rally. History suggests that the best market rallies tend to come during bear markets. Just look at this list of the all time one day gains for the S&P 500. 1929, 1930's, 1987, 2008, 2020 - all years with some of the worst bear markets of the last century.
So, stay vigilant because the worst may not be over, but that doesn't mean there won't be opportunities. The tough part is selling a giant rally because you hate to miss out on big gains, but bear market rallies don't last very long (although some do) and often it's best to sell them.
Admin Note: March Madness is starting! Free Contest with Prizes for winners.
More info: https://www.tsptalk.com/mb/site-news-and-announcements/38581-march-madness-contest-2022-a.html
The S&P 500 (C-fund) gained over 2% again yesterday so the wild swings continue. There's a lot of talk of the 50 and 200 day moving averages crossing, and this is called a death cross because it tends to mean trouble for the intermediate term. However in my experience, when it first crosses we seem to get decent short-term oversold rallies before it rolls over again. You can see that any attempt at a relief rally would be contesting some stubborn resistance.
The DWCPF (small caps / S-fund) lagged a bit yesterday and wasn't the explosive fund that it was during last week's rally. Interest rates tend to put more pressure on smaller companies, although the small regional banks can do well. Also, the price of oil falling hurts some of the oil refinery companies in the small cap index.
The EFA (I-fund) has been consolidating sideways since the snap back rally last week, and it has been holding within that large gap area, which has basically been filled, but it is now up again resistance. Is this another roadblock, or can it gap above it?
BND (Bonds / F-fund) was actually up yesterday, but I'll be honest, I don't know why. The 2, 10, and 30 year bond yields were all up, which usually means bond prices (F-fund) are down. Not yesterday.
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 for reading. We'll see you back here tomorrow.
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.
