Stocks played Turnaround Tuesday on a Monday this week as the S&P 500 and small caps broke a 4-day losing streak and posted solid gains yesterday. The pullback off the high to Friday's low retraced about 50% of the gains from the early August low to the late August high in both the C and S-funds, so is that enough or is there more pain to follow? Bonds were up as yields eased down again.
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I was anticipating a weak follow through day yesterday and maybe a Turnaround Tuesday bounce today, but the market had other ideas. I'm not sure what that means. The losses last week were severe so we did have some extreme short-term oversold readings and the bounce may have erased that, plus the S&P 500 is now stuck below its 50-day EMA, which was right where the index peaked yesterday.
When everyone is in the same boat it's tough for the boat to easily move in that direction. That's how I felt about yesterday. We were all looking for weakness in September, the market got clobbered last week chasing the herd into the bearish boat. That opened the lane for the path less followed and possible rebound, and that may be what happened yesterday.
It's another busy week with tonight's presidential debate where each candidate may layout their economic plans. Then we get the CPI and PPI inflation related reports and each could have a major impact on yields and interest rates.
Is the market ready to follow the typical seasonal pattern, particularly the weak Septembers and Octobers during election years, or has that been over played? September and October are just getting started so it may be overly optimistic to expect the worst to be over, but we're just a week way from lower interest rates, and the market has been waiting for that for a couple of years.
Even the average September over the last 30 years does have a less bearish period, although it's not very long, and we may be in it right now.
Chart provided courtesy of www.sentimentrader.com
The 10-year Treasury Yield was up for most of the day yesterday but it closed lower and was actually a new closing low for the yield as it continues to flirt with the August intraday low.
Another look at one of the main market leaders, the Dow Transportation Index bounced back 1.35% yesterday closing back above its 50, 100, and 200-day EMAs and Friday's low successfully filled and held at the bottom of the open gap from August 15. This isn't bad action, but that bearish head an shoulders pattern is still evident.
Again, we'll get the CPI report on Wednesday, and the PPI on Thursday but tonight the debate could answer some policy questions regarding capital gains taxes, crypto-currencies, AI, price gouging caps, and the economy in general. Or it could give one candidate a boost and give us more clarity as to who might win the election, but whatever happens, it could be a market mover.
The S&P 500 (C-fund) rallied nicely on Monday but it still has some technical issues. It couldn't quite make it back above its 50-day EMA, although it made a good run at it. There is some support between 5350 and 5400, and if it holds at the recent lows, it creates a very clean right shoulder of a bullish inverted head and shoulders pattern. It's a busy week for news so I wouldn't rule out any possibility, and with good arguments on both sides of the isle, I wouldn't be surprised at either outcome. Even if stocks are ready to rebound, it may not be a clean move higher as the news comes out. Technically there is an open gap between Friday's close and yesterday's low, and another below that.
The pullback down to Friday's low on the DWCPF (S-fund) retraced about 50% of the gains from the early August low to the late August peak. That's a nice clean area for it to hold, if the market can be that convenient.
The EFA (I-fund) gained 1% despite a big rally in the dollar. Not bad.
BND (F-fund) made another new closing high as it tries to climb up the negative reversal kangaroo tail from Friday. The trend is up but there's still room on the downside within the trading channel.
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
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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 was anticipating a weak follow through day yesterday and maybe a Turnaround Tuesday bounce today, but the market had other ideas. I'm not sure what that means. The losses last week were severe so we did have some extreme short-term oversold readings and the bounce may have erased that, plus the S&P 500 is now stuck below its 50-day EMA, which was right where the index peaked yesterday.
When everyone is in the same boat it's tough for the boat to easily move in that direction. That's how I felt about yesterday. We were all looking for weakness in September, the market got clobbered last week chasing the herd into the bearish boat. That opened the lane for the path less followed and possible rebound, and that may be what happened yesterday.
It's another busy week with tonight's presidential debate where each candidate may layout their economic plans. Then we get the CPI and PPI inflation related reports and each could have a major impact on yields and interest rates.
Is the market ready to follow the typical seasonal pattern, particularly the weak Septembers and Octobers during election years, or has that been over played? September and October are just getting started so it may be overly optimistic to expect the worst to be over, but we're just a week way from lower interest rates, and the market has been waiting for that for a couple of years.
Even the average September over the last 30 years does have a less bearish period, although it's not very long, and we may be in it right now.
Chart provided courtesy of www.sentimentrader.com
The 10-year Treasury Yield was up for most of the day yesterday but it closed lower and was actually a new closing low for the yield as it continues to flirt with the August intraday low.
Another look at one of the main market leaders, the Dow Transportation Index bounced back 1.35% yesterday closing back above its 50, 100, and 200-day EMAs and Friday's low successfully filled and held at the bottom of the open gap from August 15. This isn't bad action, but that bearish head an shoulders pattern is still evident.
Again, we'll get the CPI report on Wednesday, and the PPI on Thursday but tonight the debate could answer some policy questions regarding capital gains taxes, crypto-currencies, AI, price gouging caps, and the economy in general. Or it could give one candidate a boost and give us more clarity as to who might win the election, but whatever happens, it could be a market mover.
The S&P 500 (C-fund) rallied nicely on Monday but it still has some technical issues. It couldn't quite make it back above its 50-day EMA, although it made a good run at it. There is some support between 5350 and 5400, and if it holds at the recent lows, it creates a very clean right shoulder of a bullish inverted head and shoulders pattern. It's a busy week for news so I wouldn't rule out any possibility, and with good arguments on both sides of the isle, I wouldn't be surprised at either outcome. Even if stocks are ready to rebound, it may not be a clean move higher as the news comes out. Technically there is an open gap between Friday's close and yesterday's low, and another below that.
The pullback down to Friday's low on the DWCPF (S-fund) retraced about 50% of the gains from the early August low to the late August peak. That's a nice clean area for it to hold, if the market can be that convenient.
The EFA (I-fund) gained 1% despite a big rally in the dollar. Not bad.
BND (F-fund) made another new closing high as it tries to climb up the negative reversal kangaroo tail from Friday. The trend is up but there's still room on the downside within the trading channel.
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.
