Stocks rallied in front of today's FOMC meeting so investors showed some bravery despite some recent concerns of a peak. The Dow led the indices jumping 320-points and it was kind of a relief that the rally wasn't necessary tech driven as the biggest gainers in the Dow were Home Deport, Goldman Sachs, and McDonald's. Small caps hung in there with the S&P 500 as both posted positive outside reversal days, and it was actually the tech heavy Nasdaq that lagged a bit, despite a positive reversal in Nvidia's stock yesterday. The I-fund was held back by another gain in the dollar.
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Market breadth was good with about 2 advancers for every decliner so it was a broad rally, but why the bravado in front of today's FOMC meeting? The market has priced in a 99% probability that there will not be a change to interest rates today. For the May meeting there is a 96% chance of no rate change priced in. When we get to June that changes to a 61% change of a 0.25% rate cut. That is actually up from a day ago when it was 51%.
So, yesterday's rally in stocks had a lot to do with an increase of the probably of an interest rate cut in June, and the 10-year Treasury Yield reflected that with a modest decline off the double top. Now that decline may be leading us into a right shoulder of an inverted head and shoulders pattern so any pullback could be short-lived. Will the Fed feed the hawks and push this above the neckline, or will they ease interest rate concerns and help it form that right shoulder? Boring, right? Well, it's calling the shots right now.
The dollar broke through some resistance yesterday and that may not be the best news for the I-fund.
Remember when the Equal Weighted S&P 500 (RSP) was lagging the S&P 500 Index dramatically most of last year? That is, the same 500 stocks, but the Equal Weighted Index doesn't not base its value on market cap like the S&P 500. Well, it has been improving. This is important to us - not because these stocks are in the S-fund, but because it suggests a broadening out of the rally, which which would help the S-fund, and yesterday it came within a whisper of a new closing high.
Back to check on the market leading, economically sensitive Dow Transportation Index: It had a nice day yesterday gaining 0.79%, but it closed just below its key 100-day EMA, something that had been holding for months, so this needs a little more upside to stay within its recent trading range and avoid a possible breakdown. If this remains the market leader, we may have some concerns here if it doesn't improve soon.
Day two of the FOMC meeting concludes today and while we don't expect any move on interest rates, Jerome Powell will speak and almost certainly move the market after 2 PM ET.
Admin Note: Ready for our Annual March Madness Contest? It's free and there's prizes! The deadline to join is Thursday when they tip off the first game. More info
The S&P 500 (C-fund) closed at an all-time high yesterday after a positive outside reversal day, and right now it is about in the middle between the rising resistance line, and that amazing 15-day moving average that has been a floor of support. We have a flat top look, but this is the 6th test of that red line. When you keep knocking on resistance, eventually they should let you in. So what's next - a breakout above the all time highs, or a breakdown below the 15-day EMA? Place your bets!
DWCPF (S-fund) also had a positive outside reversal day as the low was lower than Monday's low, and the high was higher than Monday's high, and it closed above Monday's high. It bounced off that 30-day EMA again, but it is also up against some descending resistance heading into the Fed meeting.
EFA (I-fund) lagged a bit after the dollar rallied strongly. The chart looks good as long as the flag-like pattern does what bull flags tend to do -- breakout to the upside.
BND (Bonds / F-fund) was up as yields finally backed off from the double top on the 10-year Treasury Yield. It's not all's clear here yet, but some support held.
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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Market breadth was good with about 2 advancers for every decliner so it was a broad rally, but why the bravado in front of today's FOMC meeting? The market has priced in a 99% probability that there will not be a change to interest rates today. For the May meeting there is a 96% chance of no rate change priced in. When we get to June that changes to a 61% change of a 0.25% rate cut. That is actually up from a day ago when it was 51%.
So, yesterday's rally in stocks had a lot to do with an increase of the probably of an interest rate cut in June, and the 10-year Treasury Yield reflected that with a modest decline off the double top. Now that decline may be leading us into a right shoulder of an inverted head and shoulders pattern so any pullback could be short-lived. Will the Fed feed the hawks and push this above the neckline, or will they ease interest rate concerns and help it form that right shoulder? Boring, right? Well, it's calling the shots right now.
The dollar broke through some resistance yesterday and that may not be the best news for the I-fund.
Remember when the Equal Weighted S&P 500 (RSP) was lagging the S&P 500 Index dramatically most of last year? That is, the same 500 stocks, but the Equal Weighted Index doesn't not base its value on market cap like the S&P 500. Well, it has been improving. This is important to us - not because these stocks are in the S-fund, but because it suggests a broadening out of the rally, which which would help the S-fund, and yesterday it came within a whisper of a new closing high.
Back to check on the market leading, economically sensitive Dow Transportation Index: It had a nice day yesterday gaining 0.79%, but it closed just below its key 100-day EMA, something that had been holding for months, so this needs a little more upside to stay within its recent trading range and avoid a possible breakdown. If this remains the market leader, we may have some concerns here if it doesn't improve soon.
Day two of the FOMC meeting concludes today and while we don't expect any move on interest rates, Jerome Powell will speak and almost certainly move the market after 2 PM ET.
Admin Note: Ready for our Annual March Madness Contest? It's free and there's prizes! The deadline to join is Thursday when they tip off the first game. More info
The S&P 500 (C-fund) closed at an all-time high yesterday after a positive outside reversal day, and right now it is about in the middle between the rising resistance line, and that amazing 15-day moving average that has been a floor of support. We have a flat top look, but this is the 6th test of that red line. When you keep knocking on resistance, eventually they should let you in. So what's next - a breakout above the all time highs, or a breakdown below the 15-day EMA? Place your bets!
DWCPF (S-fund) also had a positive outside reversal day as the low was lower than Monday's low, and the high was higher than Monday's high, and it closed above Monday's high. It bounced off that 30-day EMA again, but it is also up against some descending resistance heading into the Fed meeting.
EFA (I-fund) lagged a bit after the dollar rallied strongly. The chart looks good as long as the flag-like pattern does what bull flags tend to do -- breakout to the upside.
BND (Bonds / F-fund) was up as yields finally backed off from the double top on the 10-year Treasury Yield. It's not all's clear here yet, but some support held.
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.
