Another mixed day for the stock indices to end June. The Dow had a great day gaining over 200-points. The S&P 500 was up slightly, but the Nasdaq and small caps were down, as was the I-fund which is feeling the heat from the rallying dollar. A lower low for the 10-year yield has investors scratching their heads.
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Despite calls for higher inflation, another closing lower low in the 10-year Treasury may be telling a different story. Is this a concern for the economy? A growing economy usually signals higher yields coming in an effort to keep things from heating up too much, so the falling yield seems to be telling us that the economy is not only not heating up, but it may be slowing.
As we've talked about before, the Fed's bond buying program could also be the catalyst here so it makes analyzing the situation a bit more difficult. If we had more micro-control of our TSP accounts, the way money managers do, how would we be allocating our money? Would we be playing the growing economy plays, or the slowing economy plays? This may be why the stock indices have been mixed almost daily as investors move money from one sector to another, possibly out of confusion.
Meanwhile the dollar has been coming back to life lately after months of falling. The breakout from the bull flag is also a non-inflationary trend which can cause prices to fall. If you flip this chart over you have a close representation of what has happened to the price of gold recently, which is now about $1600 off its 2021 high.
And then there's lumber. I don't know what to make of this but it has certainly been entertaining to watch. This is a monthly chart where each candlestick represents one month of action. After jumping up over 1700 in May, lumber fell all the way below 750 at the lows in June, which happen to be where it closed at the end of 2020. I marked the pre-covid high, and the after covid lows to show how big this move was in 2021 and the latter half of 2020. What it means, again I don't know. It sure threw some havoc into the housing market, though.
New month, new direction? Maybe not? July, especially the first day, and the first half of July, has a very bullish seasonal bias, but with the S&P 500 already trading at all time highs, do the bulls have enough ammunition to keep the rally going in the new month. Sure, this being the start of the 3rd quarter probably means new money coming in during the first few days, then there's the bullish bias around the holiday weekend. After that though... it may get less easy. The June Jobs Report comes out on Friday and the estimates are in the +700,000 jobs area, with an unemployment rate expected to be 5.7%.
The S&P 500 (C-fund) made another closing high to end the second quarter. It is up against some rising resistance (orange channel) after breaking above the top of that red, more sideways channel. The blue arrow represents the negative divergence that we've talked about between the higher highs we see in the price of the S&P, vs. the falling PMO momentum indicator, and that's is a red flag.
The DWCPF (S-fund) has pulled back from its recent move to new highs, but it is still a stone's throw way from those highs. It is just below the resistance line of the wide blue trading channel, and the recent dip is pulling it back to test the top of the red channel that it broke out of last week. That could act as support, or at least try to. Of course it depends if the dip buyers show up at that price near 2250.
The EFA (I-fund) fell back below its 50-day EMA yesterday. It did that early this month and bounced right back, but this time the rally in the dollar is causing some trouble. It the dollar's breakout above that bear flag continues (see bottom of this chart) the EFA / I-fund will have a difficult time remaining above that moving average, which would certainly break the bullish rising trend on this chart.
The Transportation Index was up modestly yesterday but even the last two days looks like a mini bear flag within a bear flag, and that's after the orange bear flag broke down earlier in June. Something is going to have to change here or another test of that 100-day EMA may be in the cards. And as goes the Transports....
BND (bonds / F-fund) rallied, but closed off its highs after nearing the bottom of that open gap again. That 86 area has been firm resistance so far, but those gaps do tend to get filled, so I would be surprised if that doesn't happen in July. Of course the top of the gap could be resistance so there may be a limit on how high any rally can go.
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.
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Despite calls for higher inflation, another closing lower low in the 10-year Treasury may be telling a different story. Is this a concern for the economy? A growing economy usually signals higher yields coming in an effort to keep things from heating up too much, so the falling yield seems to be telling us that the economy is not only not heating up, but it may be slowing.
As we've talked about before, the Fed's bond buying program could also be the catalyst here so it makes analyzing the situation a bit more difficult. If we had more micro-control of our TSP accounts, the way money managers do, how would we be allocating our money? Would we be playing the growing economy plays, or the slowing economy plays? This may be why the stock indices have been mixed almost daily as investors move money from one sector to another, possibly out of confusion.
Meanwhile the dollar has been coming back to life lately after months of falling. The breakout from the bull flag is also a non-inflationary trend which can cause prices to fall. If you flip this chart over you have a close representation of what has happened to the price of gold recently, which is now about $1600 off its 2021 high.
And then there's lumber. I don't know what to make of this but it has certainly been entertaining to watch. This is a monthly chart where each candlestick represents one month of action. After jumping up over 1700 in May, lumber fell all the way below 750 at the lows in June, which happen to be where it closed at the end of 2020. I marked the pre-covid high, and the after covid lows to show how big this move was in 2021 and the latter half of 2020. What it means, again I don't know. It sure threw some havoc into the housing market, though.
New month, new direction? Maybe not? July, especially the first day, and the first half of July, has a very bullish seasonal bias, but with the S&P 500 already trading at all time highs, do the bulls have enough ammunition to keep the rally going in the new month. Sure, this being the start of the 3rd quarter probably means new money coming in during the first few days, then there's the bullish bias around the holiday weekend. After that though... it may get less easy. The June Jobs Report comes out on Friday and the estimates are in the +700,000 jobs area, with an unemployment rate expected to be 5.7%.
The S&P 500 (C-fund) made another closing high to end the second quarter. It is up against some rising resistance (orange channel) after breaking above the top of that red, more sideways channel. The blue arrow represents the negative divergence that we've talked about between the higher highs we see in the price of the S&P, vs. the falling PMO momentum indicator, and that's is a red flag.
The DWCPF (S-fund) has pulled back from its recent move to new highs, but it is still a stone's throw way from those highs. It is just below the resistance line of the wide blue trading channel, and the recent dip is pulling it back to test the top of the red channel that it broke out of last week. That could act as support, or at least try to. Of course it depends if the dip buyers show up at that price near 2250.
The EFA (I-fund) fell back below its 50-day EMA yesterday. It did that early this month and bounced right back, but this time the rally in the dollar is causing some trouble. It the dollar's breakout above that bear flag continues (see bottom of this chart) the EFA / I-fund will have a difficult time remaining above that moving average, which would certainly break the bullish rising trend on this chart.
The Transportation Index was up modestly yesterday but even the last two days looks like a mini bear flag within a bear flag, and that's after the orange bear flag broke down earlier in June. Something is going to have to change here or another test of that 100-day EMA may be in the cards. And as goes the Transports....
BND (bonds / F-fund) rallied, but closed off its highs after nearing the bottom of that open gap again. That 86 area has been firm resistance so far, but those gaps do tend to get filled, so I would be surprised if that doesn't happen in July. Of course the top of the gap could be resistance so there may be a limit on how high any rally can go.
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.
