One sentence changed the trajectory of the market. Stocks were mostly lower in early trading, but rallied into modestly positive territory before the Fed interest rate announcement and press conference. During the press conference the Fed found its inner dove and the bulls took charge. The Dow ended the day up 932-points and we saw gains near 3% in the major indices. Bonds also rallied as yields pulled back off their highs.
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The S&P 500 (C-fund) rallied 3% yesterday and once again the biggest rallies tend to come during the worst performing markets. We've seen similar reversals this year. Some of the bounces lasted weeks. Some just days. I wish I could tell you where this one will end up, but we do see some tough resistance in the 4350 to 4400 area. The March rally cut right through those moving averages but that is usually the exception in a bear market, and not the rule. We'll see. Sentiment had been very bearish so that means there is a lot of cash out there to do some buying if the bears start feeling some FOMO.
DWCPF (S-fund / small caps) got a big bounce off a very important level. There's a lot more work to do here to turn this into a bullish chart, but in the short-term, even a move back up to the 100 (orange) or even 50-day (purple) EMAs would be a big gain.
The EFA (I-fund) bounced and the bear flag breakdown that we talked about on Wednesday is no longer broken, but it would remain in that bear flag if it cannot move higher again today.
Is it time? BND (bonds / F-fund) had a nice day and the Fed's comments about not considering 0.75% rate hikes in future meetings may help ignite a much overdue relief rally in this F-fund. Stocks may do better if that happens, but at least it could outperform that slow moving G-fund if you don't want to be in stocks. If stocks do rollover again, some F-fund may actually provide a little cushion again, as it did for years for those who did the typical 60 /40 stocks / bonds allocation over those years.
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 Federal Reverse raised their Fed Funds rate by 0.50%, as was expected. The normal post rate decision volatility played out but it wasn't until the Fed Chair Powell was asked if what the chances were of 0.75% or even 1% hikes at future meetings, and Powell essentially said that they "are not actively considering" that at this time. From there stocks took off and we had one of those explosive bear market type rallies.
The dollar fell on this news and that tends to push prices higher so not only stocks rallied, but oil, bitcoin, gold, silver, and other commodities also rallied. One gap was nearly filled on the UUP dollar chart and there are more below, but longer term...
... the dollar is hitting a 5+ year triple top. Triple tops aren't generally as strong as double tops, and we could see what happened to the dollar at the double top in 2020. But with the Fed saying that 0.75% hikes off the table, and the dollar likely pricing in larger hikes, perhaps we could see a strong pullback here for a while.
Not only would that help the I-fund, but the F-fund may be back in play as we could see yields start to dip. It's only 2 days off the recent highs, but yesterday saw a negative reversal day in the 10-year Treasury yield, and maybe (just maybe) we've seen an intermediate term peak here. We'd need some further confirmation but bond prices are certainly due for some kind of rally.
The Dow Transportation Index, the economically sensitive market leader, also rallied 3% yesterday, but what made this one different was the close back above its 50-day EMA. It quickly failed to hold the last time it closed above it on April 20th, but overall the 50 EMA is above the 200-EMA, which is above the 300, so this is aligning up well -- if it can hold.
We knew we could get some kind of big move off the Fed decision, and the bulls won that round, but the fight isn't over and we'll see if they have stamina left to produce a meaningful follow through to the upside, or if the flurry of punches they threw at the bears tired them out. This could turn into just another sell the rally opportunity for the bears but charts like the one above look slightly more promising because of those moving averages. Unfortunately the S&P and Nasdaq don't look as good yet, but the Transports are one of the market leaders.
We will get the April jobs report on Friday with estimates near +400,000 jobs, and an unemployment rate of 3.6%.
The dollar fell on this news and that tends to push prices higher so not only stocks rallied, but oil, bitcoin, gold, silver, and other commodities also rallied. One gap was nearly filled on the UUP dollar chart and there are more below, but longer term...
... the dollar is hitting a 5+ year triple top. Triple tops aren't generally as strong as double tops, and we could see what happened to the dollar at the double top in 2020. But with the Fed saying that 0.75% hikes off the table, and the dollar likely pricing in larger hikes, perhaps we could see a strong pullback here for a while.
Not only would that help the I-fund, but the F-fund may be back in play as we could see yields start to dip. It's only 2 days off the recent highs, but yesterday saw a negative reversal day in the 10-year Treasury yield, and maybe (just maybe) we've seen an intermediate term peak here. We'd need some further confirmation but bond prices are certainly due for some kind of rally.
The Dow Transportation Index, the economically sensitive market leader, also rallied 3% yesterday, but what made this one different was the close back above its 50-day EMA. It quickly failed to hold the last time it closed above it on April 20th, but overall the 50 EMA is above the 200-EMA, which is above the 300, so this is aligning up well -- if it can hold.
We knew we could get some kind of big move off the Fed decision, and the bulls won that round, but the fight isn't over and we'll see if they have stamina left to produce a meaningful follow through to the upside, or if the flurry of punches they threw at the bears tired them out. This could turn into just another sell the rally opportunity for the bears but charts like the one above look slightly more promising because of those moving averages. Unfortunately the S&P and Nasdaq don't look as good yet, but the Transports are one of the market leaders.
We will get the April jobs report on Friday with estimates near +400,000 jobs, and an unemployment rate of 3.6%.
The S&P 500 (C-fund) rallied 3% yesterday and once again the biggest rallies tend to come during the worst performing markets. We've seen similar reversals this year. Some of the bounces lasted weeks. Some just days. I wish I could tell you where this one will end up, but we do see some tough resistance in the 4350 to 4400 area. The March rally cut right through those moving averages but that is usually the exception in a bear market, and not the rule. We'll see. Sentiment had been very bearish so that means there is a lot of cash out there to do some buying if the bears start feeling some FOMO.
DWCPF (S-fund / small caps) got a big bounce off a very important level. There's a lot more work to do here to turn this into a bullish chart, but in the short-term, even a move back up to the 100 (orange) or even 50-day (purple) EMAs would be a big gain.
The EFA (I-fund) bounced and the bear flag breakdown that we talked about on Wednesday is no longer broken, but it would remain in that bear flag if it cannot move higher again today.
Is it time? BND (bonds / F-fund) had a nice day and the Fed's comments about not considering 0.75% rate hikes in future meetings may help ignite a much overdue relief rally in this F-fund. Stocks may do better if that happens, but at least it could outperform that slow moving G-fund if you don't want to be in stocks. If stocks do rollover again, some F-fund may actually provide a little cushion again, as it did for years for those who did the typical 60 /40 stocks / bonds allocation over those years.
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Thanks for reading. We'll see you back here tomorrow.
Tom Crowley
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 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.
