It was a mixed day for stocks on Monday with the Dow up 248-points - a new record, the Nasdaq down 0.52%, and the S&P 500 flat most of the day but closing near the highs of the day after a late push higher. It was a quiet day with stock trading in a tight range and it has become a rare event to see stocks close right about where they opened the day. Bonds were up as yields continue to slide into this week's FOMC meeting.
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The big tech and semiconductors lagged yesterday but Intel released some bullish news right after the closing bell yesterday and the stock was trading up over 8% within a couple of minutes. That may help the tech sector today but clearly all eyes are on this week's 2-day Fed meeting that starts today and will culminate with the decision on interest rates tomorrow at 2 PM. However we will get the August retail sales figures today which could impact the Fed's decision.
Three senators are calling for the Fed to cut rates by 0.75% this week. They are obviously concerned about the economy, or perhaps giving the economy a boost before the election. The Fed wasn't phased by Trump's commenting on lower rates when he was in office, and hopefully that means Powell will stick to his plan rather than doing anything that would even hint at political interference this close to an election. But perhaps they are leaning toward 0.50% since the odds of a 0.50% had gone up to over 60% yesterday anyway.
So at this point maybe 0.25% is less likely after just a week or so ago the market was nervous about what a 0.50% would mean. A few more economic reports later and the market is onboard with 0.50%, but the reaction may all hedge on the verbiage they use in the policy statement, and the presser afterward.
If they go 0.25%, there could be disappointment from those who wanted 0.50%, and if they go 0.50% it may trigger fears that something is more concerning in the economy than originally thought.
On the other hand the Fed may be admitting that they fell behind by going 0.50%, so 0.25% is still very much on the table. They can always go 0.25% and put 0.50% cuts on the table for the November and / or December meetings.
In the end, the size of the cut probably doesn't matter to the economy, but it matters to the stock market as everyone places their bets. We mentioned this before, but it is not normal to see the Fed cutting interest rates when the stock market is at (Dow) or near all time highs. It's amazing that they would consider 0.50% under those circumstances.
The 10-Year Treasury Yield closed at a new low for the year at 3.62%. A 0.25% was certainly priced into the market but are these new lows a result of the bond market adjusting to a 0.50% cut?
The September seasonality chart gets much more bearish starting on the 17th or 19th (the 18th has a good record.) I've showed this a couple of times before, but during election years it seems to matter who is running. Either that or the sample size of election years is so small that it is not meaningful data. Here is the full election year seasonality chart, highlighting mid-September to late October .
It's much better, although not great, when there is an incumbent president running (green), compared to an open field (red.) This year that is sort of questionable. There's no incumbent but Harris is the VP and she got Biden's Campaign money so it feels like there's an incumbent.
If all that is not enough, this is a quadruple witching expiration week, which makes things more interesting as money managers and hedge funds try to protect certain levels in the major indices until the close on Friday. Throw in a full moon this week and all the wolves of Wall Street will be howling.
The S&P 500 (SPY / C-fund) looks good and it could churn near the prior highs for a while, but it is almost certain that once the Fed announces their decision on interest rates, this will either breakout to new highs, or fail miserably at the neckline of this inverted head and shoulder pattern. The PMO indicator at the bottom looks more favorable for stocks at the moment, but seasonality is still leaning on the bears' side.
The DWCPF (S-fund) led yesterday as it battles its way back toward it prior peak. Again, that prior peak could be resistance, or the inverted head and shoulder pattern will do what they tend to do... break out to the upside.
The EFA (I-fund) is acting similar to US funds, as far as the inverted head and shoulders pattern look. The I-fund will be changing to another fund and we won't be able to use EFA as a tracking ETF. I'm looking into an ETF that will be similar to the EFA, using MSCI ACWI IMI ex USA ex China ex Hong Kong Index, which is the new approach. They are taking out China and Hong Kong and adding countries like India and Brazil. Here's more information from tsp.gov.
BND (F-fund) made another new high so perhaps the bond market is pricing in a 0.50% cut tomorrow?
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.html
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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[TD="width: 311, align: center"] Daily TSP Funds Return
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The big tech and semiconductors lagged yesterday but Intel released some bullish news right after the closing bell yesterday and the stock was trading up over 8% within a couple of minutes. That may help the tech sector today but clearly all eyes are on this week's 2-day Fed meeting that starts today and will culminate with the decision on interest rates tomorrow at 2 PM. However we will get the August retail sales figures today which could impact the Fed's decision.
Three senators are calling for the Fed to cut rates by 0.75% this week. They are obviously concerned about the economy, or perhaps giving the economy a boost before the election. The Fed wasn't phased by Trump's commenting on lower rates when he was in office, and hopefully that means Powell will stick to his plan rather than doing anything that would even hint at political interference this close to an election. But perhaps they are leaning toward 0.50% since the odds of a 0.50% had gone up to over 60% yesterday anyway.
So at this point maybe 0.25% is less likely after just a week or so ago the market was nervous about what a 0.50% would mean. A few more economic reports later and the market is onboard with 0.50%, but the reaction may all hedge on the verbiage they use in the policy statement, and the presser afterward.
If they go 0.25%, there could be disappointment from those who wanted 0.50%, and if they go 0.50% it may trigger fears that something is more concerning in the economy than originally thought.
On the other hand the Fed may be admitting that they fell behind by going 0.50%, so 0.25% is still very much on the table. They can always go 0.25% and put 0.50% cuts on the table for the November and / or December meetings.
In the end, the size of the cut probably doesn't matter to the economy, but it matters to the stock market as everyone places their bets. We mentioned this before, but it is not normal to see the Fed cutting interest rates when the stock market is at (Dow) or near all time highs. It's amazing that they would consider 0.50% under those circumstances.
The 10-Year Treasury Yield closed at a new low for the year at 3.62%. A 0.25% was certainly priced into the market but are these new lows a result of the bond market adjusting to a 0.50% cut?
The September seasonality chart gets much more bearish starting on the 17th or 19th (the 18th has a good record.) I've showed this a couple of times before, but during election years it seems to matter who is running. Either that or the sample size of election years is so small that it is not meaningful data. Here is the full election year seasonality chart, highlighting mid-September to late October .
It's much better, although not great, when there is an incumbent president running (green), compared to an open field (red.) This year that is sort of questionable. There's no incumbent but Harris is the VP and she got Biden's Campaign money so it feels like there's an incumbent.
If all that is not enough, this is a quadruple witching expiration week, which makes things more interesting as money managers and hedge funds try to protect certain levels in the major indices until the close on Friday. Throw in a full moon this week and all the wolves of Wall Street will be howling.
The S&P 500 (SPY / C-fund) looks good and it could churn near the prior highs for a while, but it is almost certain that once the Fed announces their decision on interest rates, this will either breakout to new highs, or fail miserably at the neckline of this inverted head and shoulder pattern. The PMO indicator at the bottom looks more favorable for stocks at the moment, but seasonality is still leaning on the bears' side.
The DWCPF (S-fund) led yesterday as it battles its way back toward it prior peak. Again, that prior peak could be resistance, or the inverted head and shoulder pattern will do what they tend to do... break out to the upside.
The EFA (I-fund) is acting similar to US funds, as far as the inverted head and shoulders pattern look. The I-fund will be changing to another fund and we won't be able to use EFA as a tracking ETF. I'm looking into an ETF that will be similar to the EFA, using MSCI ACWI IMI ex USA ex China ex Hong Kong Index, which is the new approach. They are taking out China and Hong Kong and adding countries like India and Brazil. Here's more information from tsp.gov.
BND (F-fund) made another new high so perhaps the bond market is pricing in a 0.50% cut tomorrow?
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.html
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.
