Some weaker than expected manufacturing data came out on Wednesday morning and that sent bond yields sharply lower (bond prices higher) and with stocks currently in a "fade the yields" mode, the indices rallied strongly on the news. The Dow was up 184-points, or just 0.54%, but most of the major indices were up 1% or more. Nvidia reported after the bell and the fireworks started immediately.
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The first of the one-two punch events this week came out after the bell yesterday with Nvidia releasing earnings. They clobbered expectation and future guidance, so for a second quarter in a row, the stock could gap up this morning and set a bullish tone for the day since it was trading over 500, but still bouncing around, after hours yesterday. Whether that tone can hold into the close like it did back in May remains to be seen, but for now, the bulls will celebrate.
(Update, last check at 6:30 PM ET on Wed had NVDA trading closer to 500.)
With Nvidia earnings behind us, but still very much in play as we watch to see how inventors react to any gap up open, the next catalyst hits the market tomorrow starting at 10:05 ET when Fed Chair Jerome Powell speaks at the Jackson Hole Symposium.
The market spent the past few weeks digesting the large rally that started around the time Nvidia opened its prior gap, and during that digesting it was taking into account how far interest rates have gone, where inflation is at the moment, China's economy, and also analyzing earnings season which will start to wind down.
Yields had been rallying sharply for the last two weeks until yesterday's big move lower, which was welcomed by the stock market. The Yield on the 10-year Treasury fell down to 4.2%, but more importantly, stalled at some serious overhead resistance.
Yesterday's decline in yields pushed BND (Bonds / F-fund) back above the recently broken support line. In yesterday's minimal analysis on bonds and BND I said, "Getting back above 70.75 is the first order of business", and not only did it do that with a gap up open yesterday, but it also put itself right in front of another test of resistance.
The dollar was up early, but down by the close and ending the day at the lows, but right on some rising resistance. The weaker dollar helps prices so a breakdown here near longer-term upper resistance, similar to the 10-year yield chart up above, would also be short-term bullish for stocks if that rising support fails.
One of the negative catalysts facing the stock market is the economic slowdown in China. The Shanghai Composite chart looks bad after recently breaking below the neckline of its head and shoulders pattern, and it is now testing the 2021 low from January.
The market is at a tricky point and in a couple of weeks we may look back at today and say it was an easy sell sign with stocks bouncing sharply in a downtrend. Or, we may say it was an easy buy sign as the index charts bounced off support and Nvidia gave another May-like green light for tech and A-I growth. Only one of those will be right.
The S&P 500 (C-fund) has now rallied almost 200-points off the low made a week ago. It got through some weaker resistance, but also the 50-day EMA yesterday, and if the Nvidia driven after hours rally from Wednesday night can hold into today's open, we could see a gap up above the next layer of resistance. If that happens and the rally doesn't fail by the close, the bulls may have something to feed on, but the Fed is still looming tomorrow. A failed gap opening would be a warning.
DWCPF (S-fund) rallied 1.2% yesterday and stopped at one of the descending resistance lines. The 200-day EMA has been holding, and that's big, but getting back above the 50-day EMA like the S&P 500 did yesterday, would be as big since that is a generally a wall of resistance for relief rallies that fail. It looks like a possible head and shoulders pattern with 1785 the shoulder's area.
EFA (I-fund) rallied along with the US stocks, and yesterday's negative reversal in the dollar makes this an interesting fund. It has some ground to make up on a relief rally, but the resistance is still very present in the 71.50 area.
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.
Like what you're seeing on TSP Talk? Why not Tell a Friend about us? We'd really appreciate it, and they may too.
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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 first of the one-two punch events this week came out after the bell yesterday with Nvidia releasing earnings. They clobbered expectation and future guidance, so for a second quarter in a row, the stock could gap up this morning and set a bullish tone for the day since it was trading over 500, but still bouncing around, after hours yesterday. Whether that tone can hold into the close like it did back in May remains to be seen, but for now, the bulls will celebrate.
(Update, last check at 6:30 PM ET on Wed had NVDA trading closer to 500.)
With Nvidia earnings behind us, but still very much in play as we watch to see how inventors react to any gap up open, the next catalyst hits the market tomorrow starting at 10:05 ET when Fed Chair Jerome Powell speaks at the Jackson Hole Symposium.
The market spent the past few weeks digesting the large rally that started around the time Nvidia opened its prior gap, and during that digesting it was taking into account how far interest rates have gone, where inflation is at the moment, China's economy, and also analyzing earnings season which will start to wind down.
Yields had been rallying sharply for the last two weeks until yesterday's big move lower, which was welcomed by the stock market. The Yield on the 10-year Treasury fell down to 4.2%, but more importantly, stalled at some serious overhead resistance.
Yesterday's decline in yields pushed BND (Bonds / F-fund) back above the recently broken support line. In yesterday's minimal analysis on bonds and BND I said, "Getting back above 70.75 is the first order of business", and not only did it do that with a gap up open yesterday, but it also put itself right in front of another test of resistance.
The dollar was up early, but down by the close and ending the day at the lows, but right on some rising resistance. The weaker dollar helps prices so a breakdown here near longer-term upper resistance, similar to the 10-year yield chart up above, would also be short-term bullish for stocks if that rising support fails.
One of the negative catalysts facing the stock market is the economic slowdown in China. The Shanghai Composite chart looks bad after recently breaking below the neckline of its head and shoulders pattern, and it is now testing the 2021 low from January.
The market is at a tricky point and in a couple of weeks we may look back at today and say it was an easy sell sign with stocks bouncing sharply in a downtrend. Or, we may say it was an easy buy sign as the index charts bounced off support and Nvidia gave another May-like green light for tech and A-I growth. Only one of those will be right.
The S&P 500 (C-fund) has now rallied almost 200-points off the low made a week ago. It got through some weaker resistance, but also the 50-day EMA yesterday, and if the Nvidia driven after hours rally from Wednesday night can hold into today's open, we could see a gap up above the next layer of resistance. If that happens and the rally doesn't fail by the close, the bulls may have something to feed on, but the Fed is still looming tomorrow. A failed gap opening would be a warning.
DWCPF (S-fund) rallied 1.2% yesterday and stopped at one of the descending resistance lines. The 200-day EMA has been holding, and that's big, but getting back above the 50-day EMA like the S&P 500 did yesterday, would be as big since that is a generally a wall of resistance for relief rallies that fail. It looks like a possible head and shoulders pattern with 1785 the shoulder's area.
EFA (I-fund) rallied along with the US stocks, and yesterday's negative reversal in the dollar makes this an interesting fund. It has some ground to make up on a relief rally, but the resistance is still very present in the 71.50 area.
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.
Like what you're seeing on TSP Talk? Why not Tell a Friend about us? We'd really appreciate it, and they may too.
Thanks!
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.
