It was a slow, mixed day on Wall Street on Tuesday as investors await a plethora of data and earnings in the coming week and a half. The Dow lost 96-points on the day and small caps were held back by higher yields, but the Nasdaq and S&P 500 both made new all times highs with their modest gains. The I-fund was down as the dollar rallied again, and bonds (F) were also down on the higher yields.
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The stock market was relatively quiet yesterday heading into a busy two week period with Tesla reporting earnings after the bell today - kicking off the "Magnificent Seven" reports. I posted this list the other day but as a reminder here's the dates of the other six with all but Nvidia reporting between today and next Thursday:
We will also get the 4th quarter GDP number on Thursday, which is rear-view mirror data, but could move bond yields, as can the PCE Prices inflation data report, which comes out on Friday before the opening bell.
The 10-year Treasury Yield has been hanging out between the 50-day EMA and the 200-day EMA for the last few days, and while there could be a big move after the release of those economic reports at the end of the week, it's also possible that the 10-year is going to trade in a range for a while. Former Fed President Bullard said yesterday that he expects the Federal Reserve to begin lowering interest rates before inflation hits 2%. He said, “Inflation on a 12-month core basis, you could get to 2% by the third quarter of this year.” So there seems to be a cap on yields yet there has not been a major slowdown in the economy to send the yield meaningfully lower either, so it might stay in the neighborhood of 3.75% to 4.5% for a while.
The dollar was up yesterday and I was expecting the chart above to perhaps fill in the right shoulder of that blue inverted head and shoulders pattern, although there are some open gaps above that may still be a lure as it nearly broke out above that neckline already yesterday.
Why do I talk so much about the 10-year yield and the dollar? I'm glad you asked. After rallying 2% on Monday, the S-fund pulled back a bit yesterday, and look at the minute by minute correlation between the 10-year yield and DWCPF. Clearly they were moving counter to each other. The bond market closes an hour before the stock market, which is why TNX stops at 3PM.
What about the I-fund and the dollar? Yup, same thing. The dollar was up sharply early but as it weakened in the afternoon yesterday, the I-fund was bouncing back from steep morning losses.
That means the GDP and the PCE reports on Thursday and Friday could be market movers if they are able move yields and the dollar.
We talk about those correlations often but hopefully it helps some of our newer readers learn something.
Netflix was soaring after reporting earnings after the bell yesterday, while Texas Instruments was down and pressuring the semiconductor stocks. And as I mentioned, Tesla reports after the bell today.
The S&P 500 (C-fund) was up but it's churning after Friday's big rally. A move down to the breakout line would not be surprising, and could actually be healthy as long as it holds in that area, or at least at 4766 where the 20-day EMA is crossing another rising support line.
DWCPF (S-fund) struggled early yesterday, bounced back midday, but weakened again into the close after the bond market closed. With the move above the high made a couple of weeks ago, it wouldn't be too presumptuous to see this make an attempt at the December highs. What happens there is a different story as we all know about double top pullback possibilities.
BND (F-fund) was down yesterday but it remains in a bullish looking flag, which suggests higher bond prices within and maybe above the flag. As long as the 50-day EMA (purple) and the bottom of the flag holds, that is. We may know the answer by the end of the week.
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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The stock market was relatively quiet yesterday heading into a busy two week period with Tesla reporting earnings after the bell today - kicking off the "Magnificent Seven" reports. I posted this list the other day but as a reminder here's the dates of the other six with all but Nvidia reporting between today and next Thursday:
We will also get the 4th quarter GDP number on Thursday, which is rear-view mirror data, but could move bond yields, as can the PCE Prices inflation data report, which comes out on Friday before the opening bell.
The 10-year Treasury Yield has been hanging out between the 50-day EMA and the 200-day EMA for the last few days, and while there could be a big move after the release of those economic reports at the end of the week, it's also possible that the 10-year is going to trade in a range for a while. Former Fed President Bullard said yesterday that he expects the Federal Reserve to begin lowering interest rates before inflation hits 2%. He said, “Inflation on a 12-month core basis, you could get to 2% by the third quarter of this year.” So there seems to be a cap on yields yet there has not been a major slowdown in the economy to send the yield meaningfully lower either, so it might stay in the neighborhood of 3.75% to 4.5% for a while.
The dollar was up yesterday and I was expecting the chart above to perhaps fill in the right shoulder of that blue inverted head and shoulders pattern, although there are some open gaps above that may still be a lure as it nearly broke out above that neckline already yesterday.
Why do I talk so much about the 10-year yield and the dollar? I'm glad you asked. After rallying 2% on Monday, the S-fund pulled back a bit yesterday, and look at the minute by minute correlation between the 10-year yield and DWCPF. Clearly they were moving counter to each other. The bond market closes an hour before the stock market, which is why TNX stops at 3PM.
What about the I-fund and the dollar? Yup, same thing. The dollar was up sharply early but as it weakened in the afternoon yesterday, the I-fund was bouncing back from steep morning losses.
That means the GDP and the PCE reports on Thursday and Friday could be market movers if they are able move yields and the dollar.
We talk about those correlations often but hopefully it helps some of our newer readers learn something.
Netflix was soaring after reporting earnings after the bell yesterday, while Texas Instruments was down and pressuring the semiconductor stocks. And as I mentioned, Tesla reports after the bell today.
The S&P 500 (C-fund) was up but it's churning after Friday's big rally. A move down to the breakout line would not be surprising, and could actually be healthy as long as it holds in that area, or at least at 4766 where the 20-day EMA is crossing another rising support line.
DWCPF (S-fund) struggled early yesterday, bounced back midday, but weakened again into the close after the bond market closed. With the move above the high made a couple of weeks ago, it wouldn't be too presumptuous to see this make an attempt at the December highs. What happens there is a different story as we all know about double top pullback possibilities.
BND (F-fund) was down yesterday but it remains in a bullish looking flag, which suggests higher bond prices within and maybe above the flag. As long as the 50-day EMA (purple) and the bottom of the flag holds, that is. We may know the answer by the end of the week.
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.
