The Dow suffered its worst day of 2022 on Thursday with a 622-point loss. So much for the Russians pulling back troops. I think we saw that coming, and we've also been expecting an attempt at a test of the lows. That may still develop although sentiment is getting quite bearish and that could mean the selling is getting overdone. But at this point I think the bulls would welcome a test of the lows to get it over with, with the hope that it turns into a double bottom. Bonds and gold were the winners yesterday as investors opted for the safety trades.
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The S&P 500 (C-fund) rolled over after its 2-day rally, and it finds itself back below the 200-day EMA. The lowest close for the index was about 4325 in late January, and of course a test of the intraday lows would have it back down near 4200. There's a lot to not like here as the chart looks bad, but as I mentioned, some of the indicators are getting extreme again so perhaps in the next few trading days we see some kind of bounce back. That could be AFTER a test of the lows, we don't know, and even if we do get another bounce, it doesn't mean the lows have to hold down the road. Stay nimble!
The DWCPF (small caps / S-fund) had been building that bear flag for some time. It broke down last Friday and then we saw a bounce back toward the bottom of the flag, where it has now failed, and pulled right back down. I can't see how this one avoids a test of the lows.
The EFA (I-fund) showed some hope on Wednesday when it rallied back above the 200-day EMA, but it had that open gap to fill, and yesterday it was in the process of filling that gap (blue).
BND (Bonds / F-fund) was up as investors dumped money in bonds while stocks were tanking. Bonds are still in a downtrend, and in a "sell the rallies" mode.
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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Thanks for reading. Have a great holiday weekend!
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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Russia, Russia, Russia! The headlines are flip flopping and the stock market, which is always looking for a catalyst, is following along. Of course there's more going on than that as the Fed still contemplates whether to raise rates in March by 0.25% or 0.50%, and some say a 0.50% is not yet priced into the market. It may depend on the economic reports that we get between now and that next FOMC meeting.
We see many indicators getting into extreme territory, which can mean a reversal is coming, but the charts don't look all that healthy as some of the bear flags that we have been watching are in the midst of breaking down.
The 10-year Treasury Yield moved back below 2% to 1.97% yesterday, but that was more about investors buying bonds out of fear, rather than seeing yields coming down because of economic conditions or the Fed.
These are weekly charts of the S&P 500 and the top one is from 2015 - 2016 where we saw two double bottoms play out within about six months of each other. The second one in early 2016 successfully tested the 200-week EMA twice before a bottom was made. The current chart is below that...
You can see that we tested the 200-week average back during the COVID crash but this current correction is nowhere near that level, so maybe we are setting up for something like we saw in 2015 - 2016 where we get a double bottom, but the rally in between leads to another double bottom in the fall that eventually tests that 200-week EMA again? Total speculation on my part. I'm just looking for some kind of pattern to follow.
The HYG High Yield Corporate Bond Fund has been a good guide for letting us know the trouble that was coming in the stock market. It is clearly still in a down trend but there was a small glass half full moment when its low yesterday was above Monday's low, perhaps suggesting a more bullish shift? It's probably too early to make any call like that since it is still in the descending trading channel, but it's something I am watching to help give us a clue when this ship might be ready to turn around.
Monday is a holiday so that is also part of the equation and the tendency for pre / post holiday reversals are certainly on my radar. A rally today in stocks may muddy those waters however, since that would mean 3 up days out of the last 4 for the S&P 500, meaning any reversal next week could be... down?
Holiday closing alert from tsp.gov: "Some financial markets will be closed on Monday, February 21 in observance of the Washington's Birthday holiday. The Thrift Savings Plan will also be closed. Transactions that would have been processed Monday night (February 21) will be processed Tuesday night (February 22), at Tuesday's closing share prices."
We see many indicators getting into extreme territory, which can mean a reversal is coming, but the charts don't look all that healthy as some of the bear flags that we have been watching are in the midst of breaking down.
The 10-year Treasury Yield moved back below 2% to 1.97% yesterday, but that was more about investors buying bonds out of fear, rather than seeing yields coming down because of economic conditions or the Fed.
These are weekly charts of the S&P 500 and the top one is from 2015 - 2016 where we saw two double bottoms play out within about six months of each other. The second one in early 2016 successfully tested the 200-week EMA twice before a bottom was made. The current chart is below that...
You can see that we tested the 200-week average back during the COVID crash but this current correction is nowhere near that level, so maybe we are setting up for something like we saw in 2015 - 2016 where we get a double bottom, but the rally in between leads to another double bottom in the fall that eventually tests that 200-week EMA again? Total speculation on my part. I'm just looking for some kind of pattern to follow.
The HYG High Yield Corporate Bond Fund has been a good guide for letting us know the trouble that was coming in the stock market. It is clearly still in a down trend but there was a small glass half full moment when its low yesterday was above Monday's low, perhaps suggesting a more bullish shift? It's probably too early to make any call like that since it is still in the descending trading channel, but it's something I am watching to help give us a clue when this ship might be ready to turn around.
Monday is a holiday so that is also part of the equation and the tendency for pre / post holiday reversals are certainly on my radar. A rally today in stocks may muddy those waters however, since that would mean 3 up days out of the last 4 for the S&P 500, meaning any reversal next week could be... down?
Holiday closing alert from tsp.gov: "Some financial markets will be closed on Monday, February 21 in observance of the Washington's Birthday holiday. The Thrift Savings Plan will also be closed. Transactions that would have been processed Monday night (February 21) will be processed Tuesday night (February 22), at Tuesday's closing share prices."
The S&P 500 (C-fund) rolled over after its 2-day rally, and it finds itself back below the 200-day EMA. The lowest close for the index was about 4325 in late January, and of course a test of the intraday lows would have it back down near 4200. There's a lot to not like here as the chart looks bad, but as I mentioned, some of the indicators are getting extreme again so perhaps in the next few trading days we see some kind of bounce back. That could be AFTER a test of the lows, we don't know, and even if we do get another bounce, it doesn't mean the lows have to hold down the road. Stay nimble!
The DWCPF (small caps / S-fund) had been building that bear flag for some time. It broke down last Friday and then we saw a bounce back toward the bottom of the flag, where it has now failed, and pulled right back down. I can't see how this one avoids a test of the lows.
The EFA (I-fund) showed some hope on Wednesday when it rallied back above the 200-day EMA, but it had that open gap to fill, and yesterday it was in the process of filling that gap (blue).
BND (Bonds / F-fund) was up as investors dumped money in bonds while stocks were tanking. Bonds are still in a downtrend, and in a "sell the rallies" mode.
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. Have a great holiday weekend!
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.
