Stocks rallied on Friday in front of the long Martin Luther King Jr., holiday weekend and Inauguration Day, and that was a little surprising consider how much was on the table. Not only were there potentially hundreds of new executive orders getting passed, but also the debt ceiling will be hit today, yet the stock market marched forward without fear, or at least easily climbed a wall of worry. Get ready for two busy weeks for the markets.
You can see the latest updated TSP share prices and returns, usually posted daily by 8:30 PM ET here: https://www.tsptalk.com/tsp_share_prices.php
While next week, the final week in January, is going to have a plethora of catalysts with an FOMC meeting, the PCE inflation data and six of the Magnificent 7 stocks reporting earnings, this week will also have its share of news flow as we have a new president sworn in and with it potentially hundreds of new executive orders becoming law. How many of these will impact the stock market, good or bad, I don't know, but I would expect volatility to increase over the next couple of weeks as they get revealed.
There are other major financial events occurring this week including the US debt ceiling being hit today. Here's more from an X post by "@TomasOnMarkets:
"Is a huge wave of liquidity coming?
"The US will officially hit the debt ceiling on Tuesday.
"And the Treasury may be forced to drain the Treasury General Account.
"This could mean a big liquidity injection into markets - but it's not that simple."
It's a long explanation. If you're interested, click here for the details:
The 10-year Treasury Yield was up slightly on Friday, stopping the sharp 3-day decline after the CPI report. Currently 4.61%, there is some support in the 4.5% area, but the trend is still up until further something changes on the chart.
The weekly chart of the 10-year yield shows the uptrend, the breakout above longer term resistance in December, and a double top pause so far in January.
TomasOnMarkets talked about the potential liquidity coming, which is bullish for the stock market. This next chart from the St. Louis Fed:
"Liabilities and Capital: Other Factors Draining Reserve Balances: Reserve Balances with Federal Reserve Banks: Week Average"
Source: https://fred.stlouisfed.org/series/WRESBAL
... is also feeding the increasing money supply and this is a good set up for the stock market, no matter how overvalued it may be. Interest rates and money supply are probably more influential to the stock market than the economy or earnings themselves, which may be a little disturbing, but it is what it is.
Seasonality tends to have a headwind this week, but to be honest, I don't know if it is different during years when there is a new president sworn in. The tendency seems to have more to do with the pre / post holiday weekend. If it matters, the stock market was open on Inauguration Day in 2021 (the holiday was on the 18th) and it was a very positive day. It moved sideways the rest of that week in 2021, then fell sharply the week after.
The futures opened on Monday evening up about 0.4% in the Dow, S&P 500, and Nasdaq, suggesting a possible gap up open on Tuesday morning. Open gaps are populating many of the charts.
The S&P 500 (C-fund) broke above the large bullish flag with another gap up open on Friday and, after finally filling in the post-Election Day open gap just last week, this breakout is occurring without first filling in the CPI driven open gap from last Wednesday. So the question is, will the old resistance of the top of that bull flag, now act as support, or will the open gaps lure it back down?
DWCPF (S-fund) lagged the large caps on Friday after big tech had a nice come back day. The bear flag is still intact on this chart and there are also two, technically three, open gaps below. It looks promising but there is more work to be done here.
ACWX (the I-fund tracking index) was up 0.53% on Friday and the I-fund was given a gain of 0.38%. It was a positive day, but you can see that the overhead resistance persists.
The strength in the dollar continues to put pressure on the overseas markets prices.
BND (bonds) was up slightly on Friday, although the F-fund was given a small loss. On the daily chart BND is heading toward some potential resistance as it approaches its 50-day EMA. However...
... the longer weekly chart show that BND held at some strong support at the 200-week moving average, and the peaks a year ago near 71.
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
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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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You can see the latest updated TSP share prices and returns, usually posted daily by 8:30 PM ET here: https://www.tsptalk.com/tsp_share_prices.php
While next week, the final week in January, is going to have a plethora of catalysts with an FOMC meeting, the PCE inflation data and six of the Magnificent 7 stocks reporting earnings, this week will also have its share of news flow as we have a new president sworn in and with it potentially hundreds of new executive orders becoming law. How many of these will impact the stock market, good or bad, I don't know, but I would expect volatility to increase over the next couple of weeks as they get revealed.
There are other major financial events occurring this week including the US debt ceiling being hit today. Here's more from an X post by "@TomasOnMarkets:
"Is a huge wave of liquidity coming?
"The US will officially hit the debt ceiling on Tuesday.
"And the Treasury may be forced to drain the Treasury General Account.
"This could mean a big liquidity injection into markets - but it's not that simple."
It's a long explanation. If you're interested, click here for the details:
The 10-year Treasury Yield was up slightly on Friday, stopping the sharp 3-day decline after the CPI report. Currently 4.61%, there is some support in the 4.5% area, but the trend is still up until further something changes on the chart.
The weekly chart of the 10-year yield shows the uptrend, the breakout above longer term resistance in December, and a double top pause so far in January.
TomasOnMarkets talked about the potential liquidity coming, which is bullish for the stock market. This next chart from the St. Louis Fed:
"Liabilities and Capital: Other Factors Draining Reserve Balances: Reserve Balances with Federal Reserve Banks: Week Average"
Source: https://fred.stlouisfed.org/series/WRESBAL
... is also feeding the increasing money supply and this is a good set up for the stock market, no matter how overvalued it may be. Interest rates and money supply are probably more influential to the stock market than the economy or earnings themselves, which may be a little disturbing, but it is what it is.
Seasonality tends to have a headwind this week, but to be honest, I don't know if it is different during years when there is a new president sworn in. The tendency seems to have more to do with the pre / post holiday weekend. If it matters, the stock market was open on Inauguration Day in 2021 (the holiday was on the 18th) and it was a very positive day. It moved sideways the rest of that week in 2021, then fell sharply the week after.
The futures opened on Monday evening up about 0.4% in the Dow, S&P 500, and Nasdaq, suggesting a possible gap up open on Tuesday morning. Open gaps are populating many of the charts.
The S&P 500 (C-fund) broke above the large bullish flag with another gap up open on Friday and, after finally filling in the post-Election Day open gap just last week, this breakout is occurring without first filling in the CPI driven open gap from last Wednesday. So the question is, will the old resistance of the top of that bull flag, now act as support, or will the open gaps lure it back down?
DWCPF (S-fund) lagged the large caps on Friday after big tech had a nice come back day. The bear flag is still intact on this chart and there are also two, technically three, open gaps below. It looks promising but there is more work to be done here.
ACWX (the I-fund tracking index) was up 0.53% on Friday and the I-fund was given a gain of 0.38%. It was a positive day, but you can see that the overhead resistance persists.
The strength in the dollar continues to put pressure on the overseas markets prices.
BND (bonds) was up slightly on Friday, although the F-fund was given a small loss. On the daily chart BND is heading toward some potential resistance as it approaches its 50-day EMA. However...
... the longer weekly chart show that BND held at some strong support at the 200-week moving average, and the peaks a year ago near 71.
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.
