Stocks started the new week with a bang despite the pivotal CPI report which comes out this morning before the opening bell. The Dow gained 377-points yesterday and we saw 1% plus gains in most of the broader indices, and they closed near the highs of the day with the help of lower bond yields and a dip in the dollar. The bond market and the stocks market may not be seeing eye to eye on the inflation picture, so who will be right?
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Longer term bond yields moved lower yesterday, but the more recent trend has been up. Also, the shorter term bond yields like the 2-year, 6-month, 3-month, etc., moved higher on the day so the bond market is having a little battle going on. The stock market investors are positioning themselves for something less inflationary while the bond market is suggesting possible inflationary trouble ahead. With bond traders generally considered more savvy than stocks market inventors, we'll soon see which of them has positioned themselves best for today's CPI report.
The dollar was down and flip flopping above and below the 50-day EMA, while building a bullish looking flag. Bull flags tend to break upward, but with that large open gap below, I don't know which is more likely to win this formation battle.
The action was good yesterday although trading volume was fairly light in front of this morning's CPI, so there wasn't a tremendous amount of conviction in the buying. The prior CPI report saw a 5.7% year over year increase in consumer pricing and the trend has been lower. However, after the recent ridiculously strong jobs report (as far as missing the estimates by so much) earlier this month, I don't even want to venture a guess at what this report might say. I can only react.
The S&P 500 (C-fund) continues to build on that bullish looking flag after bouncing off of that rising support line and the 20-day EMA, and getting back above the December highs. This looks good although one concern I might have is that flag patterns did not work that well in 2022. This will be a good test.
DWCPF (S-fund) also bounced off its 20-day EMA and it remains above its December highs but the decline off the highs here looks less like a bull flag and more like a peak, although the support looks so prevalent that a move higher wouldn't be much of a surprise.
The EFA (I-fund) had a good day with the dollar sliding lower. It too is holding at its 20-day EMA, a good test for bull market action, and the 4-week long consolidation is also a nice bullish pattern to build on.
BND (Bonds / F-fund) was up and moved back above the 200-day MA but remains below the 50-day EMA, the 200-day EMA, and the rising support line. As I said above, the bond market seems to think the CPI data might be stronger (more inflationary) than the stock market is indicating.
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 so much 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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Longer term bond yields moved lower yesterday, but the more recent trend has been up. Also, the shorter term bond yields like the 2-year, 6-month, 3-month, etc., moved higher on the day so the bond market is having a little battle going on. The stock market investors are positioning themselves for something less inflationary while the bond market is suggesting possible inflationary trouble ahead. With bond traders generally considered more savvy than stocks market inventors, we'll soon see which of them has positioned themselves best for today's CPI report.
The dollar was down and flip flopping above and below the 50-day EMA, while building a bullish looking flag. Bull flags tend to break upward, but with that large open gap below, I don't know which is more likely to win this formation battle.
The action was good yesterday although trading volume was fairly light in front of this morning's CPI, so there wasn't a tremendous amount of conviction in the buying. The prior CPI report saw a 5.7% year over year increase in consumer pricing and the trend has been lower. However, after the recent ridiculously strong jobs report (as far as missing the estimates by so much) earlier this month, I don't even want to venture a guess at what this report might say. I can only react.
The S&P 500 (C-fund) continues to build on that bullish looking flag after bouncing off of that rising support line and the 20-day EMA, and getting back above the December highs. This looks good although one concern I might have is that flag patterns did not work that well in 2022. This will be a good test.
DWCPF (S-fund) also bounced off its 20-day EMA and it remains above its December highs but the decline off the highs here looks less like a bull flag and more like a peak, although the support looks so prevalent that a move higher wouldn't be much of a surprise.
The EFA (I-fund) had a good day with the dollar sliding lower. It too is holding at its 20-day EMA, a good test for bull market action, and the 4-week long consolidation is also a nice bullish pattern to build on.
BND (Bonds / F-fund) was up and moved back above the 200-day MA but remains below the 50-day EMA, the 200-day EMA, and the rising support line. As I said above, the bond market seems to think the CPI data might be stronger (more inflationary) than the stock market is indicating.
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 so much 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.
