Stocks recovered from an early sell off on Thursday morning to close nearly flat, but still down, after another afternoon rally. The Dow dropped 20-points and the I-fund played catch up on Thursday to lead the funds after the overseas markets reacted to Wednesday's late rally in the US markets. Yields, the dollar, and especially oil were down yesterday keeping the bears from doing any major damage.
[TABLE="align: center"]
[TR]
[TD="align: center"]
[/TD]
[TD]
[/TD]
[TD="width: 338, align: center"] Daily TSP Funds Return
[TABLE="align: center"]
[TR]
[TD="align: right"][/TD]
[/TR]
[/TABLE]
[/TD]
[/TR]
[/TABLE]
We get the September Jobs Report this morning before the opening bell and estimates are looking for a gain of about 150,000 jobs. The unemployment rate is expected to drop to 3.7%. All eyes are on this report as investors try to figure out the Fed's game plan for interest rates.
The next FOMC meeting is on November 1st, four weeks away, and every economic report will be put under the microscope for clues to whether they plan to hike rates again or not. The jobs report is one of the biggies although the data will be four weeks old by the time we get to that meeting.
Basically a hot report - many more jobs created than expected, could be disastrous as yields will likely spike on the news. If the report comes in light, yields could drop and trigger a rally in stocks, but how weak is too weak, if that's even possible in this environment? The bond market would jump (yields drop) and stocks might rally initially on a weak report, but at some point if the data is too weak, then the stock market will have to continue to price in a possible recession.
If stocks rally after the jobs report announcement, but fail to hold the gains into the close, that will be bad news and could bring about the eventual capitulation, and that would push the indices to lower levels. A gap up that holds on a favorable report could set a bullish tone for the rest of the year.
The 10-year Treasury Yield and the dollar were down modestly yesterday and for the bulls' sake, I hope that the fact that stocks didn't rally on those declining yields was a product of concern going into this morning's jobs report. There's room for the 10-year to drop and still remain in the rising channel...
... but the dollar's trading channel is so narrow that it will likely break out, or break down on the news. A stronger than expected report would send yields higher and probably smack down the stock market.
The price of oil has been in a free fall for the lat week, and fell through a convergence of support yesterday. This is helping the market somewhat because, like yields, if it is falling because of weak economic conditions, it could help stocks in the short-term, but the macro economic picture would be more concerning.
Mike Santoli on CNBC talked about this Russell 1000 chart yesterday showing the test of the prior lows. These are the biggest 1000 stocks in the US stock market. What I saw was the large head and shoulders and a failed test at the head of that formation, which may be a major warning sign if it breaks down. So holding here looks crucial.
The IWM or Russell 2000 small caps chart has a similar formation except its head test created a major double top formation. Whether this can go straight down for another month after that sharp decline from the 197 area, I don't know. It seems like it could use some relief, but if or when that lower support gets taken out, the downside targets would be literally off the chart.
Negative seasonality will be getting better starting next week as the seasonal tax loss selling deadline approaches. Whether that helps the market remains to be seen as there is a lot going on, as there usually is in October, but that's one phenomenon that can create the shift out of the weak August / September periods, and into the late October period and into the thick of the 4th quarter.
From tsp.gov: "Some financial markets will be closed on Monday, October 9, in observance of Columbus Day. The Thrift Savings Plan will also be closed. Transactions that would have been processed Monday night (October 9) will be processed Tuesday night (October 10) at Tuesday's closing share prices."
Because the TSP won't be processing transactions that day, we will take the day off as well and won't be updating our commentary or premium reports on Monday. However, there's always a chance that there could be a non-TSP trade made and alerts sent for the ETF systems of the premium services because the stock market will be open. It's the bond market that will be closed.
The S&P 500 (C-fund) can't seem to make its way back above the 200-day EMA but it may be tentative bulls who want to see the jobs report before they start buying at that level. As I mentioned above, some of the longer term charts look troubling, but a bounce above the 200-day EMA could still have the ability to trigger a more meaningful short term relief rally. Filling that open gap near 4400 and retesting the 50-day EMA is not out of the question, even if this eventually flips over again.
DWCPF (S-fund, small caps) has already broken several layers of support and looks vulnerable, but the fact that it is hanging around that old blue gap that was filled this week, is a good sign, although it is trading just below it. The jobs report will have the ability to push this back into, or above the gap, or send it packing and keeping the descending trading channel intact where it is staring at those May lows just below 1620.
The EFA (I-fund) was up nicely yesterday but as I talked about, a lot of that gain was basically the overseas market reacting to the late rally in the US markets on Wednesday. The dollar was down and again, if the jobs report can poke a hole below the rising channel on that UUP chart (in the top section), this could continue to rally. Otherwise, the chart looks suspect.
BND (bonds / F-fund) has seen a couple of days of relief and of course stocks and bonds don't go straight down or up so a relief bounce is nothing until we see some follow through, but it's a start. There's some overhead open gaps that could be a target on a bounce, but that 69.25 area could try to hold it back.
Thanks so much for reading! Have a great holiday weekend! Reminder - no reports on Monday.
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.
[TABLE="align: center"]
[TR]
[TD="align: center"]
[TD]
[/TD]
[TD="width: 338, align: center"] Daily TSP Funds Return
[TR]
[TD="align: right"][/TD]
[/TR]
[/TABLE]
[/TD]
[/TR]
[/TABLE]
We get the September Jobs Report this morning before the opening bell and estimates are looking for a gain of about 150,000 jobs. The unemployment rate is expected to drop to 3.7%. All eyes are on this report as investors try to figure out the Fed's game plan for interest rates.
The next FOMC meeting is on November 1st, four weeks away, and every economic report will be put under the microscope for clues to whether they plan to hike rates again or not. The jobs report is one of the biggies although the data will be four weeks old by the time we get to that meeting.
Basically a hot report - many more jobs created than expected, could be disastrous as yields will likely spike on the news. If the report comes in light, yields could drop and trigger a rally in stocks, but how weak is too weak, if that's even possible in this environment? The bond market would jump (yields drop) and stocks might rally initially on a weak report, but at some point if the data is too weak, then the stock market will have to continue to price in a possible recession.
If stocks rally after the jobs report announcement, but fail to hold the gains into the close, that will be bad news and could bring about the eventual capitulation, and that would push the indices to lower levels. A gap up that holds on a favorable report could set a bullish tone for the rest of the year.
The 10-year Treasury Yield and the dollar were down modestly yesterday and for the bulls' sake, I hope that the fact that stocks didn't rally on those declining yields was a product of concern going into this morning's jobs report. There's room for the 10-year to drop and still remain in the rising channel...
... but the dollar's trading channel is so narrow that it will likely break out, or break down on the news. A stronger than expected report would send yields higher and probably smack down the stock market.
The price of oil has been in a free fall for the lat week, and fell through a convergence of support yesterday. This is helping the market somewhat because, like yields, if it is falling because of weak economic conditions, it could help stocks in the short-term, but the macro economic picture would be more concerning.
Mike Santoli on CNBC talked about this Russell 1000 chart yesterday showing the test of the prior lows. These are the biggest 1000 stocks in the US stock market. What I saw was the large head and shoulders and a failed test at the head of that formation, which may be a major warning sign if it breaks down. So holding here looks crucial.
The IWM or Russell 2000 small caps chart has a similar formation except its head test created a major double top formation. Whether this can go straight down for another month after that sharp decline from the 197 area, I don't know. It seems like it could use some relief, but if or when that lower support gets taken out, the downside targets would be literally off the chart.
Negative seasonality will be getting better starting next week as the seasonal tax loss selling deadline approaches. Whether that helps the market remains to be seen as there is a lot going on, as there usually is in October, but that's one phenomenon that can create the shift out of the weak August / September periods, and into the late October period and into the thick of the 4th quarter.
From tsp.gov: "Some financial markets will be closed on Monday, October 9, in observance of Columbus Day. The Thrift Savings Plan will also be closed. Transactions that would have been processed Monday night (October 9) will be processed Tuesday night (October 10) at Tuesday's closing share prices."
Because the TSP won't be processing transactions that day, we will take the day off as well and won't be updating our commentary or premium reports on Monday. However, there's always a chance that there could be a non-TSP trade made and alerts sent for the ETF systems of the premium services because the stock market will be open. It's the bond market that will be closed.
The S&P 500 (C-fund) can't seem to make its way back above the 200-day EMA but it may be tentative bulls who want to see the jobs report before they start buying at that level. As I mentioned above, some of the longer term charts look troubling, but a bounce above the 200-day EMA could still have the ability to trigger a more meaningful short term relief rally. Filling that open gap near 4400 and retesting the 50-day EMA is not out of the question, even if this eventually flips over again.
DWCPF (S-fund, small caps) has already broken several layers of support and looks vulnerable, but the fact that it is hanging around that old blue gap that was filled this week, is a good sign, although it is trading just below it. The jobs report will have the ability to push this back into, or above the gap, or send it packing and keeping the descending trading channel intact where it is staring at those May lows just below 1620.
The EFA (I-fund) was up nicely yesterday but as I talked about, a lot of that gain was basically the overseas market reacting to the late rally in the US markets on Wednesday. The dollar was down and again, if the jobs report can poke a hole below the rising channel on that UUP chart (in the top section), this could continue to rally. Otherwise, the chart looks suspect.
BND (bonds / F-fund) has seen a couple of days of relief and of course stocks and bonds don't go straight down or up so a relief bounce is nothing until we see some follow through, but it's a start. There's some overhead open gaps that could be a target on a bounce, but that 69.25 area could try to hold it back.
Thanks so much for reading! Have a great holiday weekend! Reminder - no reports on Monday.
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.
