A big move higher in bond yields wasn't enough to keep the Dow and S&P 500 from shaking off some big early losses and turn them into gains by the close. Small caps and the I-fund lagged posting a big loss, but they too came well off their lows after the indices had become quite oversold. Is this a bottom? It's way too early to say, but a dead cat bounce, at the last, after the August second half shellacking is not out of the question - even in a bear market.
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We have been eying that 3900 area on the S&P 500 as being some possible support. That doesn't have to be the low for the market but it was likely that some technical traders could start buying there, especially with many of the oscillator type indicators being so oversold. The charts are still broken so even a relief rally wouldn't mean much unless it hold and starts to take out some overhead resistance. I am still looking to that open gap near the 3800 area as another possible downside target, should any rebound fail.
The price of oil fell again so that helps the bullish case, but new highs in the dollar and another move higher in the yield on the 10-year Treasury doesn't help. The 10-year is up to 3.22% (2-year is 3.52% so the yield curve is still inverted), and any technical bounce in the indices will still have to deal with this.
Internally yesterday it was a lot weaker than the S&P 500 and Dow would suggest, and that was why the broader small caps indices lagged.
We talked about Apple recently and the "as goes Apple" attitude toward the stock market. Yesterday Apple's chart hit its 200-day EMA and the rising support line, and rebounded, as if on queue. The broader market would love to see that hold as a low for this recent leg down.
We get the August jobs report this morning and estimates are looking for a gain of 300,000 jobs and an unemployment rate of 3.5%. Bad news will likely be bad good for stocks here as the Fed wants to see some weakness in the labor market before considering any slow down in interest rate hikes. After last months +528,000 upside surprise in the July report, will we see negative revisions? That, and weak report for August would likely actually help stocks.
The next CPI report and Fed FOMC meeting are 2 and 3 weeks away respectively, and that's an eternity in market days and a lot can happen between now and then. Quantitative tightening of $95 billion per month will also begin this month so while an oversold market can bounce, there are still obstacles.
From tsp.gov: "Some financial markets will be closed on Monday, September 5 in observance of the Labor Day holiday. The Thrift Savings Plan will also be closed. Transactions that would have been processed Monday night (September 5) will be processed Tuesday night (September 6), at Tuesday's closing share prices."
We talked about the S&P 500 (C-fund) above.
DWCPF (S-fund / small caps) gapped down and then rebounded late but still ended the day with a sharp loss. This looks good for a possible rebound after that reversal, but will the jobs report give the index what it needs to confirm this short term positive development?
EFA (I-fund) also had a sharp loss and the breakout in the dollar was why it was one of the laggards.
The BND (Bonds / F-fund) gapped down with yields moving up sharply on the day yesterday. It's below a lot of key support but it got a bounce at another level of support near 73.75. Bonds are very oversold and may be due for relief, along with stocks.
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. Have a great weekend!
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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We have been eying that 3900 area on the S&P 500 as being some possible support. That doesn't have to be the low for the market but it was likely that some technical traders could start buying there, especially with many of the oscillator type indicators being so oversold. The charts are still broken so even a relief rally wouldn't mean much unless it hold and starts to take out some overhead resistance. I am still looking to that open gap near the 3800 area as another possible downside target, should any rebound fail.
The price of oil fell again so that helps the bullish case, but new highs in the dollar and another move higher in the yield on the 10-year Treasury doesn't help. The 10-year is up to 3.22% (2-year is 3.52% so the yield curve is still inverted), and any technical bounce in the indices will still have to deal with this.
Internally yesterday it was a lot weaker than the S&P 500 and Dow would suggest, and that was why the broader small caps indices lagged.
We talked about Apple recently and the "as goes Apple" attitude toward the stock market. Yesterday Apple's chart hit its 200-day EMA and the rising support line, and rebounded, as if on queue. The broader market would love to see that hold as a low for this recent leg down.
We get the August jobs report this morning and estimates are looking for a gain of 300,000 jobs and an unemployment rate of 3.5%. Bad news will likely be bad good for stocks here as the Fed wants to see some weakness in the labor market before considering any slow down in interest rate hikes. After last months +528,000 upside surprise in the July report, will we see negative revisions? That, and weak report for August would likely actually help stocks.
The next CPI report and Fed FOMC meeting are 2 and 3 weeks away respectively, and that's an eternity in market days and a lot can happen between now and then. Quantitative tightening of $95 billion per month will also begin this month so while an oversold market can bounce, there are still obstacles.
From tsp.gov: "Some financial markets will be closed on Monday, September 5 in observance of the Labor Day holiday. The Thrift Savings Plan will also be closed. Transactions that would have been processed Monday night (September 5) will be processed Tuesday night (September 6), at Tuesday's closing share prices."
We talked about the S&P 500 (C-fund) above.
DWCPF (S-fund / small caps) gapped down and then rebounded late but still ended the day with a sharp loss. This looks good for a possible rebound after that reversal, but will the jobs report give the index what it needs to confirm this short term positive development?
EFA (I-fund) also had a sharp loss and the breakout in the dollar was why it was one of the laggards.
The BND (Bonds / F-fund) gapped down with yields moving up sharply on the day yesterday. It's below a lot of key support but it got a bounce at another level of support near 73.75. Bonds are very oversold and may be due for relief, along with stocks.
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. Have a great weekend!
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.
