The large tech stocks showed some life on Tuesday but outside of that, the Dow and the broader market disappointed, and the broader the index, the steeper the losses yesterday. The S&P 500 lost 0.42% on the the day but the Equal Weighted S&P 500 lost 1.2%. Small caps dropped 1.5% and the I-fund lost almost 1% as the dollar continues to rally. Yields moved higher to push the F-fund down.
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Post holiday reversal? Maybe, but the question is whether there is more to it than that, or just a pullback that can be bought, if or when the reversal is done?
The internal numbers were pretty bad, especially outside of the large tech sector. We were even seeing more 52-week lows yesterday than new highs, despite the major indices being much closer to all time highs than the year's lows.
The yield on the 10-year Treasury was up sharply again as it heads back toward the recent highs, and higher yields are not what the stock market wants to see right now.
The double whammy of a stronger dollar combined with higher yields took its toll on the stock market, looking at the two charts above, the technical setup looks stronger for the upside than the downside in yields and the dollar. That could change at any time but the market may need a catalyst to turn these ships around, and we have a week before next week's CPI report that may or may not be that catalyst.
One of the major market leaders took a dive yesterday. The Dow Transportation Index broke down after the bearish looking flag gave way and the chart plunged back under its 50-day EMA. Not the best looking set up here, and if this is still the market leader, it's not a great sign for the rest of the market.
The price of oil was up sharply again and, if the higher interest yields and dollar weren't enough, rising oil prices may start to weigh on stocks as well. Last week stocks rallied in the face of higher oil prices, but the pre-holiday action is behind us, and if the stock market was looking for another catalyst, this is not what it wanted to see.
We had some good action last week but I couldn't have been more annoying reminding you about the holiday reversal tendencies. Now we are starting to see some cracks in the Transports, rising oil prices, higher yields, a stronger dollar, as well as some possible lower highs on the index charts. It could be setting up a buying opportunity but those charts better start shaping up.
Administrative Note: It's time for the 2023 NFL Survivor Pool again. It's a very easy contest to do - just pick one winning team every week and you move on to the next week. As always, it's free. The deadline to register and make your week one pick is the start of the first game this coming Sunday. More information
The S&P 500 (C-fund) pulled back moderately yesterday after last week's nice run higher. That large break up candle from last week may need to get digested a little more before we see anymore upside, and at that point the S&P would be testing the 20 and 50-day EMAs again. In a perfect world that would be a nice setup for a place to do some buying if you have cash, but this isn't a perfect world and the issue is that last week's rally could have been nothing more than a pre-holiday reversal that is about to reverse back down and resume the August downtrend, and that could mean a lower low. It's certainly tough to say either way, but watch the support areas and how the indices react around them. That will give us a clue as to the sentiment of investors. Are they willing to buy dips to support, or not?
The RSP is the Equal Weighted S&P 500 and you can see how badly it underperformed yesterday. Of course these are the same 500 stocks that are in the S&P 500 Index so the broader market is lagging again, while the major indices may be masking the market's weakness.
DWCPF (S-fund) fell hard yesterday giving back Friday's "odd" rally. Odd in that yields and the dollar were up Friday so I thought the strength in small caps was unusual, and Tuesday showed us that maybe it was a fluke. That move lower brings a head and shoulders pattern more into the picture.
The EFA (I-fund) also made a lower low and it fell back below one of its descending resistance lines after what looks to be false breakout during the pre-holiday rally. There is an open gap just below, and perhaps that is all that this is going to do on the downside, but if the dollar continues to rally, the prior lows could easily get tested.
BND (Bonds / F-fund) has had a rough two trading days but I think there's an outside chance that the 70.50 (bottom of an open gap) to 70.60 area (the old broken resistance line) could turn out to be support and perhaps a good place to catch a bounce in the F-fund. The question is, if bonds go up because yields fall, will stocks be a better bet if that happens? I also wonder what these higher yields are telling us about next week's CPI and PPI reports.
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
For more info our other premium services, please go here... www.tsptalk.com/premiums.html
Daily Market Commentary Archives
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Like what you're seeing on TSP Talk? Why not Tell a Friend about us? We'd really appreciate it, and they may too.
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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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[TD="width: 338, align: center"] Daily TSP Funds Return
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[/TR]
[/TABLE]
[/TD]
[/TR]
[/TABLE]
Post holiday reversal? Maybe, but the question is whether there is more to it than that, or just a pullback that can be bought, if or when the reversal is done?
The internal numbers were pretty bad, especially outside of the large tech sector. We were even seeing more 52-week lows yesterday than new highs, despite the major indices being much closer to all time highs than the year's lows.
The yield on the 10-year Treasury was up sharply again as it heads back toward the recent highs, and higher yields are not what the stock market wants to see right now.
The double whammy of a stronger dollar combined with higher yields took its toll on the stock market, looking at the two charts above, the technical setup looks stronger for the upside than the downside in yields and the dollar. That could change at any time but the market may need a catalyst to turn these ships around, and we have a week before next week's CPI report that may or may not be that catalyst.
One of the major market leaders took a dive yesterday. The Dow Transportation Index broke down after the bearish looking flag gave way and the chart plunged back under its 50-day EMA. Not the best looking set up here, and if this is still the market leader, it's not a great sign for the rest of the market.
The price of oil was up sharply again and, if the higher interest yields and dollar weren't enough, rising oil prices may start to weigh on stocks as well. Last week stocks rallied in the face of higher oil prices, but the pre-holiday action is behind us, and if the stock market was looking for another catalyst, this is not what it wanted to see.
We had some good action last week but I couldn't have been more annoying reminding you about the holiday reversal tendencies. Now we are starting to see some cracks in the Transports, rising oil prices, higher yields, a stronger dollar, as well as some possible lower highs on the index charts. It could be setting up a buying opportunity but those charts better start shaping up.
Administrative Note: It's time for the 2023 NFL Survivor Pool again. It's a very easy contest to do - just pick one winning team every week and you move on to the next week. As always, it's free. The deadline to register and make your week one pick is the start of the first game this coming Sunday. More information
The S&P 500 (C-fund) pulled back moderately yesterday after last week's nice run higher. That large break up candle from last week may need to get digested a little more before we see anymore upside, and at that point the S&P would be testing the 20 and 50-day EMAs again. In a perfect world that would be a nice setup for a place to do some buying if you have cash, but this isn't a perfect world and the issue is that last week's rally could have been nothing more than a pre-holiday reversal that is about to reverse back down and resume the August downtrend, and that could mean a lower low. It's certainly tough to say either way, but watch the support areas and how the indices react around them. That will give us a clue as to the sentiment of investors. Are they willing to buy dips to support, or not?
The RSP is the Equal Weighted S&P 500 and you can see how badly it underperformed yesterday. Of course these are the same 500 stocks that are in the S&P 500 Index so the broader market is lagging again, while the major indices may be masking the market's weakness.
DWCPF (S-fund) fell hard yesterday giving back Friday's "odd" rally. Odd in that yields and the dollar were up Friday so I thought the strength in small caps was unusual, and Tuesday showed us that maybe it was a fluke. That move lower brings a head and shoulders pattern more into the picture.
The EFA (I-fund) also made a lower low and it fell back below one of its descending resistance lines after what looks to be false breakout during the pre-holiday rally. There is an open gap just below, and perhaps that is all that this is going to do on the downside, but if the dollar continues to rally, the prior lows could easily get tested.
BND (Bonds / F-fund) has had a rough two trading days but I think there's an outside chance that the 70.50 (bottom of an open gap) to 70.60 area (the old broken resistance line) could turn out to be support and perhaps a good place to catch a bounce in the F-fund. The question is, if bonds go up because yields fall, will stocks be a better bet if that happens? I also wonder what these higher yields are telling us about next week's CPI and PPI reports.
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
For more info our other premium services, please go here... www.tsptalk.com/premiums.html
Daily Market Commentary Archives
To get weekly or daily notifications when we post new commentary, sign up HERE.
Like what you're seeing on TSP Talk? Why not Tell a Friend about us? We'd really appreciate it, and they may too.
Thanks!
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.
