Stocks were mixed on Wednesday with the Dow and small caps up, the S&P 500 and Nasdaq down, and the I-fund flat. A lot of that had to do with Nvidia closing 1% lower on the day, which took the S&P and Nasdaq down with it, while the other indices, not directly impacted by the big tech stock, were able close positive. Bond yields were up again pushing the F-fund lower.
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In yesterday's commentary I was getting a little bearish for the short-term, especially in the S&P 500, but I can't deny that there are several positives out there as well, particularly in the small caps.
I have been saying that for a few weeks, how the small caps and the I-fund charts were basing nicely and they did eventually break out, but that relentless S&P 500 continues to move up right along with them despite being overly stretched. The question I have been having is whether the S and I-funds can do well if the S&P takes a much needed breather? Yesterday the S&P 500 did take a little breather while the S-fund was up and the I-fund was flat, so it did underperform, but those days have been few and far between.
These are the short and longer term chart of the DWCPF (S-fund) which are both at, or above, some resistance and rising support.
Other than the small caps' chart, we have some good action in the credit and the high yield markets, and that almost always leads to good things happening in the stock market. I watch this chart closely and waited a couple of months for it to break out, and it finally did last week, but it has remained a little sticky to that 77.25 area, rather than exploding to new highs. Now a support line is coming up from underneath and it's either giddy up time, or a failure will could take over. If this breakouts out with some authority, it would be a nice boost to the stock market.
The 10-year Treasury Yield gapped up and for a second straight day leaped above a key moving average. The fact that small caps led on this action in yields is encouraging as it may mean interest rates aren't the concern that they had been. But depending on how high this goes, the F-fund would feel some pain if this yield remains above those moving averages.
The dollar on the other hand has been lagging yields recently and, after failing at the 50-day EMA on Tuesday, made a lower low yesterday, although it is still in the neighborhood. A weaker dollar can mean economic weakness but it also bolsters prices.
The Dow Transportation Index, a market leader and indicator of economic strength or weakness, looks similar to that HYG chart up above, but has only a failed breakout to show for it so far. It does look primed for a breakout as it has moved sideways in a bullish pennant formation for 1 to 3 months, depending on which flag we're talking about - red or blue.
The longer-term chart shows more, perhaps heavier resistance, but also the large red bull flag is quite apparent. So, as goes the credit market (HYG), and as goes the the Transportation Index, maybe the broader market will go as well?
The PPI Report, which is wholesale prices, is on deck today, along with retail sales and the weekly jobless claims. This is a quadruple witching expiration week and it does have a bullish bias, but next week that goes away so if we are going to get a pullback, perhaps next week has the better setup. Otherwise, the market looks pretty good.
The S&P 500 (C-fund) was down slightly yesterday and the modest loss barely put a dent in Tuesday's big gain. The trend up clearly up with what looks like a lot of momentum, so it's ironic that the PMO momentum indicator at the bottom has been moving lower for the last month. That may not be good.
The EFA (I-fund) is in a groove and riding its month-long ascending trading channel after the breakout from a nice looking cup and handle formation last month. There's not much to dislike here except that a pullback down to the old breakout line near 76.50 is possible, and that would be typical breakout / retest action. I'd be happy if it filled in one of those two gaps above that old broken resistance line.
BND (Bonds / F-fund) has moved lower for the third straight day as it makes its way down to the open gap near 72.25. There is a lot of support near 72.00.
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.
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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In yesterday's commentary I was getting a little bearish for the short-term, especially in the S&P 500, but I can't deny that there are several positives out there as well, particularly in the small caps.
I have been saying that for a few weeks, how the small caps and the I-fund charts were basing nicely and they did eventually break out, but that relentless S&P 500 continues to move up right along with them despite being overly stretched. The question I have been having is whether the S and I-funds can do well if the S&P takes a much needed breather? Yesterday the S&P 500 did take a little breather while the S-fund was up and the I-fund was flat, so it did underperform, but those days have been few and far between.
These are the short and longer term chart of the DWCPF (S-fund) which are both at, or above, some resistance and rising support.
Other than the small caps' chart, we have some good action in the credit and the high yield markets, and that almost always leads to good things happening in the stock market. I watch this chart closely and waited a couple of months for it to break out, and it finally did last week, but it has remained a little sticky to that 77.25 area, rather than exploding to new highs. Now a support line is coming up from underneath and it's either giddy up time, or a failure will could take over. If this breakouts out with some authority, it would be a nice boost to the stock market.
The 10-year Treasury Yield gapped up and for a second straight day leaped above a key moving average. The fact that small caps led on this action in yields is encouraging as it may mean interest rates aren't the concern that they had been. But depending on how high this goes, the F-fund would feel some pain if this yield remains above those moving averages.
The dollar on the other hand has been lagging yields recently and, after failing at the 50-day EMA on Tuesday, made a lower low yesterday, although it is still in the neighborhood. A weaker dollar can mean economic weakness but it also bolsters prices.
The Dow Transportation Index, a market leader and indicator of economic strength or weakness, looks similar to that HYG chart up above, but has only a failed breakout to show for it so far. It does look primed for a breakout as it has moved sideways in a bullish pennant formation for 1 to 3 months, depending on which flag we're talking about - red or blue.
The longer-term chart shows more, perhaps heavier resistance, but also the large red bull flag is quite apparent. So, as goes the credit market (HYG), and as goes the the Transportation Index, maybe the broader market will go as well?
The PPI Report, which is wholesale prices, is on deck today, along with retail sales and the weekly jobless claims. This is a quadruple witching expiration week and it does have a bullish bias, but next week that goes away so if we are going to get a pullback, perhaps next week has the better setup. Otherwise, the market looks pretty good.
The S&P 500 (C-fund) was down slightly yesterday and the modest loss barely put a dent in Tuesday's big gain. The trend up clearly up with what looks like a lot of momentum, so it's ironic that the PMO momentum indicator at the bottom has been moving lower for the last month. That may not be good.
The EFA (I-fund) is in a groove and riding its month-long ascending trading channel after the breakout from a nice looking cup and handle formation last month. There's not much to dislike here except that a pullback down to the old breakout line near 76.50 is possible, and that would be typical breakout / retest action. I'd be happy if it filled in one of those two gaps above that old broken resistance line.
BND (Bonds / F-fund) has moved lower for the third straight day as it makes its way down to the open gap near 72.25. There is a lot of support near 72.00.
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.
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.
