he CPI report came in a little hotter than expected yesterday and the initial reaction was quite negative at the opening bell. We did see dip buyers show up right away, but another wave of selling before lunch sent the indices to their lows of the day. The bulls were not done yet as stock prices proceeded to move higher into the late afternoon. The indices closed mixed with the Dow losing 157-points, the S&P 500 was flat, while the Nasdaq and the small caps of the S-fund each gained about a half of a percent. Bonds were down as yields moved higher on the stronger than expected inflationary data.
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We did get some wide swings as we expected because traders are going to trade the data, with many buying and selling several times during the day - as long as the tickers are moving, and a strong market met troubling data and the battle ensued.
The 10-year Yield hit 3.8% but that didn't fill the gap that we have been noting as a possible upside target - if not a retest of the prior highs near 3.9%. It was also down earlier in the day and held at the 50-day EMA so no fill of the downside gap either.
The 6-month Treasury Yield moved above 5% yesterday, which got some attention since it was the first time that had happened since 2007 and before the financial crisis, but nothing seems out of bounds otherwise. We're all just used to yields being so low over the last 10 - 15 years, so it's relative. It was over 15% in the early 1980's. Here are the various closing yields from yesterday.
The economy is showing signs of life, especially after that outlier jobs report from January, and so the economic sensitive Dow Transportation Index has been reacting accordingly. It wasn't afraid of the higher consumer prices. No breakout yet, but like many other stock index charts, it is in a bullish flag.
By the way, the CPI came in at +0.5%, which was higher than the +0.04% expected increase in consumer prices. The year over year increase was 6.4%, also higher than the anticipated 6.2%. The concern here is that it is more ammunition for the Fed to continue to raise interest rates.
The S&P 500 (C-fund) attempted a breakout from the bull flag despite the troublesome inflationary data that we got yesterday. It probably wasn't a coincidence that the S&P 500 moved about 8 points lower in the final few minutes of trading yesterday to get it to close below the flag for another day. The spinning top candlestick formation yesterday can be a sign of a reversal coming, but is that a reversal up off of the recent pullback, or a reversal of the 2023 rally? That bull flag has some room on the downside if the bears want to try to make a move, but generally it is a bullish formation that tends to break to the upside.
DWCPF (S-fund) also closed back within its flag after a temporary failed breakout. The old orange rising support line held as support again, if that has any significance, but the blue rising support line that broke down last week may be some pesky resistance, although that line is rising at a steep angle so it may not be an issue.
The EFA (I-fund) continues to consolidate in a bullish looking flag and the 20-day EMA is also holding well. I don't see any apparent issues here, and the fact that this one has taken a breather and moved sideways for the last 4 weeks or so may mean it is ready to take the lead again.
BND (Bonds / F-fund) was down yesterday and it is still flirting with that breakdown below several layers of support. The blue lines are a parallel channel and it is close to testing the lower end now. That could be the make or break support area for the F-fund.
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. 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.
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We did get some wide swings as we expected because traders are going to trade the data, with many buying and selling several times during the day - as long as the tickers are moving, and a strong market met troubling data and the battle ensued.
The 10-year Yield hit 3.8% but that didn't fill the gap that we have been noting as a possible upside target - if not a retest of the prior highs near 3.9%. It was also down earlier in the day and held at the 50-day EMA so no fill of the downside gap either.
The 6-month Treasury Yield moved above 5% yesterday, which got some attention since it was the first time that had happened since 2007 and before the financial crisis, but nothing seems out of bounds otherwise. We're all just used to yields being so low over the last 10 - 15 years, so it's relative. It was over 15% in the early 1980's. Here are the various closing yields from yesterday.
The economy is showing signs of life, especially after that outlier jobs report from January, and so the economic sensitive Dow Transportation Index has been reacting accordingly. It wasn't afraid of the higher consumer prices. No breakout yet, but like many other stock index charts, it is in a bullish flag.
By the way, the CPI came in at +0.5%, which was higher than the +0.04% expected increase in consumer prices. The year over year increase was 6.4%, also higher than the anticipated 6.2%. The concern here is that it is more ammunition for the Fed to continue to raise interest rates.
The S&P 500 (C-fund) attempted a breakout from the bull flag despite the troublesome inflationary data that we got yesterday. It probably wasn't a coincidence that the S&P 500 moved about 8 points lower in the final few minutes of trading yesterday to get it to close below the flag for another day. The spinning top candlestick formation yesterday can be a sign of a reversal coming, but is that a reversal up off of the recent pullback, or a reversal of the 2023 rally? That bull flag has some room on the downside if the bears want to try to make a move, but generally it is a bullish formation that tends to break to the upside.
DWCPF (S-fund) also closed back within its flag after a temporary failed breakout. The old orange rising support line held as support again, if that has any significance, but the blue rising support line that broke down last week may be some pesky resistance, although that line is rising at a steep angle so it may not be an issue.
The EFA (I-fund) continues to consolidate in a bullish looking flag and the 20-day EMA is also holding well. I don't see any apparent issues here, and the fact that this one has taken a breather and moved sideways for the last 4 weeks or so may mean it is ready to take the lead again.
BND (Bonds / F-fund) was down yesterday and it is still flirting with that breakdown below several layers of support. The blue lines are a parallel channel and it is close to testing the lower end now. That could be the make or break support area for the F-fund.
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. 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.
