Stocks came stumbling out of the gate on Monday morning but after an hour or so, depending on the index, buyers stepped up and it was off to the races. Small caps were slow to respond but they eventually came along for the ride. The I-fund lagged as the rally in the US started after the European markets had already closed. Yields were up sending bonds and the F-fund lower.
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A couple of things happened yesterday that was a deviation from the recent action. We saw some late selling in the S&P 500 (C) to pull it off its highs of the day, and it was subtle, but small caps (S) actually hung in there and closed closer to their highs of the day, so that's something new.
We also saw stocks rally, even the small caps, despite a sharp move higher in the 10-year Treasury Yield, although the dollar was down trying to fill in an open gap, and that typically helps prices.
Several financial intuitions raised their year end price targets for the S&P 500 yesterday. Sounds good, but from a contrarian point of a view -- you know how that goes - if everyone is bullish, who is left to buy? That is a good way of thinking but it only works at extremes so these target increases coming at once could be a bad sign. Markets like to climb a wall of worry because it means there's plenty of pessimism, and that means cash on the sidelines to do some dip buying. theoretically, if everyone is already fully invested, where would all the buying come from?
Momentum is also a working force for the stock market and there's been plenty of that, especially in the large cap techs. So these are just theories and we're all just trying to justify what's happening or what we think is going to happen.
According to CNN's Fear Greed Index, investors are actually more bearish than bullish, but close to neutral.
Source: Fear and Greed Index - Investor Sentiment | CNN
On the other hand, our weekly TSP Talk Sentiment Survey came is quite bullish last week with 63% of those responding saying they were bullish and only 28% were bearish coming into this week. The rest were neutral. Of course that was taken after Wednesday's big rally (which later failed in the small caps) so that sentiment may have changed already.
So it's little mixed out there. there are some who are very bullish, and others who are very concerned. It makes for interesting market action.
Holiday Closing this week!
From tsp.gov: ": Some financial markets will be closed on Wednesday, June 19, in observance of Juneteenth National Independence Day. The Thrift Savings Plan will also be closed. Transactions that would have been processed Wednesday night (June 19) will be processed Thursday night (June 20) at Thursday's closing share prices."
With the holiday falling on a Wednesday, the week has a disjointed feel to it. Trading volume was good yesterday but we could have some light volume trading as investors take time off either before or after the holiday, and there's the chance of one of those pre / post holiday reversals. Friday is a quadruple witching expiration day so trading volume will spike, but it adds to the unpredictability of the week.
This is a new holiday and last year June 19 was a Monday so it was a typical holiday weekend, and the Friday before the three day weekend was the quadruple witching expiration.
There's also a Summer Solstice reversal tendency out there. You might want to Google it. I don't want to get too conspiratorial, but basically there is a tendency for markets to reverse direction around June 20th.
Translation: I don't know how deep we should get into the analysis, and we may need to treat the entire week like it's one long holiday week, like the week between Christmas and New Year's. But again, it didn't start like that yesterday so I am guessing.
The S&P 500 (C-fund) was down modestly on Monday and it's now been 4 trading days where it could have but didn't fill that open gap below 5400. Yesterday suggests that it may now give us a gap and go rather than a fill, but as we talked about, this is a weird mid-week holiday week, and a quadruple witching expiration week and things could get choppy and perhaps the gap will get filled?
DWCPF (S-fund) finally caught a bid as buyers stepped up here and in the Russell 2000, which was also up 0.86% yesterday. The small caps will eventually catch up - whether small caps move up faster or the S&P 500 slows down, but it's to tough to guess when. Hopefully we'll see it happening and we'll make some money with the S-fund when it does.
The EFA (I-fund) was up but lagged, most likely because of the timing of when the overseas markets close - which was before the US markets started to rally. The dollar was down but again, some of that strength came after the European markets were closed. Perhaps it plays catch up today, although there is now some resistance near the 50-day EMA and the late May low.
BND (bonds / F-fund) pulled back from the top of the rising trading channel, but it was due and the open gap below could be a target, but now there's an open gap above as well. I noticed that last week's high actually just about filled an old open gap from early February, so it's possible that will be firm resistance near 72.75.
Thanks so much for reading! Enjoy your Juneteenth holiday and we'll see you back here on Thursday!
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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A couple of things happened yesterday that was a deviation from the recent action. We saw some late selling in the S&P 500 (C) to pull it off its highs of the day, and it was subtle, but small caps (S) actually hung in there and closed closer to their highs of the day, so that's something new.
We also saw stocks rally, even the small caps, despite a sharp move higher in the 10-year Treasury Yield, although the dollar was down trying to fill in an open gap, and that typically helps prices.
Several financial intuitions raised their year end price targets for the S&P 500 yesterday. Sounds good, but from a contrarian point of a view -- you know how that goes - if everyone is bullish, who is left to buy? That is a good way of thinking but it only works at extremes so these target increases coming at once could be a bad sign. Markets like to climb a wall of worry because it means there's plenty of pessimism, and that means cash on the sidelines to do some dip buying. theoretically, if everyone is already fully invested, where would all the buying come from?
Momentum is also a working force for the stock market and there's been plenty of that, especially in the large cap techs. So these are just theories and we're all just trying to justify what's happening or what we think is going to happen.
According to CNN's Fear Greed Index, investors are actually more bearish than bullish, but close to neutral.
Source: Fear and Greed Index - Investor Sentiment | CNN
On the other hand, our weekly TSP Talk Sentiment Survey came is quite bullish last week with 63% of those responding saying they were bullish and only 28% were bearish coming into this week. The rest were neutral. Of course that was taken after Wednesday's big rally (which later failed in the small caps) so that sentiment may have changed already.
So it's little mixed out there. there are some who are very bullish, and others who are very concerned. It makes for interesting market action.
Holiday Closing this week!
From tsp.gov: ": Some financial markets will be closed on Wednesday, June 19, in observance of Juneteenth National Independence Day. The Thrift Savings Plan will also be closed. Transactions that would have been processed Wednesday night (June 19) will be processed Thursday night (June 20) at Thursday's closing share prices."
With the holiday falling on a Wednesday, the week has a disjointed feel to it. Trading volume was good yesterday but we could have some light volume trading as investors take time off either before or after the holiday, and there's the chance of one of those pre / post holiday reversals. Friday is a quadruple witching expiration day so trading volume will spike, but it adds to the unpredictability of the week.
This is a new holiday and last year June 19 was a Monday so it was a typical holiday weekend, and the Friday before the three day weekend was the quadruple witching expiration.
There's also a Summer Solstice reversal tendency out there. You might want to Google it. I don't want to get too conspiratorial, but basically there is a tendency for markets to reverse direction around June 20th.
Translation: I don't know how deep we should get into the analysis, and we may need to treat the entire week like it's one long holiday week, like the week between Christmas and New Year's. But again, it didn't start like that yesterday so I am guessing.
The S&P 500 (C-fund) was down modestly on Monday and it's now been 4 trading days where it could have but didn't fill that open gap below 5400. Yesterday suggests that it may now give us a gap and go rather than a fill, but as we talked about, this is a weird mid-week holiday week, and a quadruple witching expiration week and things could get choppy and perhaps the gap will get filled?
DWCPF (S-fund) finally caught a bid as buyers stepped up here and in the Russell 2000, which was also up 0.86% yesterday. The small caps will eventually catch up - whether small caps move up faster or the S&P 500 slows down, but it's to tough to guess when. Hopefully we'll see it happening and we'll make some money with the S-fund when it does.
The EFA (I-fund) was up but lagged, most likely because of the timing of when the overseas markets close - which was before the US markets started to rally. The dollar was down but again, some of that strength came after the European markets were closed. Perhaps it plays catch up today, although there is now some resistance near the 50-day EMA and the late May low.
BND (bonds / F-fund) pulled back from the top of the rising trading channel, but it was due and the open gap below could be a target, but now there's an open gap above as well. I noticed that last week's high actually just about filled an old open gap from early February, so it's possible that will be firm resistance near 72.75.
Thanks so much for reading! Enjoy your Juneteenth holiday and we'll see you back here on Thursday!
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.
