A stronger than expected GDP and fewer jobless claims, combined with end of quarter window dressing and a positive holiday bias, and the stock market took it and ran and we got another rally. The Nasdaq was flat as the 2nd quarter leader may have seen some selling while the lagging, but still very positive for the quarter, Dow, S&P 500, and small caps had a much better day. The I-fund also lagged because the dollar jumped on the stronger economic data, and bonds were down sharply as yields spiked on the same data.
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The decline in bonds was bigger than a normal daily move because the economic data continues to come in stronger than expected, despite the Fed's relentless pursuit to try to slow down the economy, the labor market, and prices.
The bull flag on the 10-year yield (see below) did what a bull flag tends to do, thanks to that GDP and jobs data, but today we will get more key inflationary data with the PCE Pricing and Personal Spending reports. These could also be big bond yield movers, but which way?
The Fed has been acting as if they have been expecting the data to come in hot as they threatened more interest rate hikes, and yesterday's data certainly proved them right. So, with fodder for higher interest rates, it's interesting that stocks remain so buoyant, and perhaps it is the pre-holiday bullish bias.
Here's the breakout from the bull flag on the 10-year yield but it is hitting a double top and, as you'll see in the second chart...
... it is also hitting some long term resistance, although also a possible big bull flag. With today being the last day for money managers and pension funds to rebalance their portfolio allocations into bonds after stocks outperformed in the second quarter, it could be a good day for bonds, but if those economic reports come in too hot, maybe we'll actually see the opposite, despite the technical resistance on the two charts above.
Why is this important? I know bonds and the dollar are very boring but they can open and close doors for the stock market. A strong dollar and higher yields can be a headwind, although not a roadblock, to the stock market. Why risk your money in the more risky S&P 500 that is now paying a yield below 5% while you (not us TSPers, but bond investors) can get 5% or more guaranteed on a 10-year Treasury Note?
The big rally in the dollar yesterday was a roadblock for the I-fund yesterday. The 2-day rally in the dollar has been too much for the international stocks, and the fund lagged badly.
The July seasonality chart is quite green, particularly in the beginning of the month surrounding the 4th of July holiday.
Chart provided courtesy of www.sentimentrader.com
RevShark mentioned this the other day, "According To Mike Zaccardi, CFA, The Nasdaq 100 (QQQ) has been up in July for the last fifteen years in a row, and the average gain has been 4.7%. That is by far the best month for the QQQ. There is a very interesting statistic, but just remember it is a tendency and not a certainty."
I also heard yesterday that the market cap of Apple - just Apple - is larger than the entire Russell 2000 Index of ~ 2000 stocks. Too big to fail?
Can stocks continue to the torrid pace that we saw in the first half of 2023?
Holiday reversals are typical surrounding major holidays but that chart doesn't show much trouble before or after the 4th of July. However, sentiment is extreme on the bullish side again, stocks are fairly overbought, and I guess there's a chance that the post holiday action can reverse the pre-holiday action, which often happens around major holidays.
There will be a half day of trading on Monday with the stock market closing bell at 1 PM ET, and of course the stock market and TSP are closed on Tuesday. I will likely post just a brief commentary on Monday since most people will be off BBQing or at the beach. Enjoy!
The S&P 500 (C-fund) posted its 3rd day of gains yesterday after the 6-day pullback. A six day pullback is not the norm in a strong market so it is possible that this rally has been some holiday nudging, or fudging, but there's probably not much the bears will do about it until after the holiday - unless today's economic data shakes things up. It did find support at the 20-day EMA this weekend there's not much resistance until 4450.
DWCPF (S-fund) has been on fire since its sharp pullback, and it certainly looks like something that should be bought on dips, but given the economic situation of rising interest rates, the Fed reducing its balance sheet, the looming recession possibility, and the KRE Regional Bank index hitting and holding below its 50-day EMA resistance yesterday, there seems to be some headwinds. What's keeping it up?
BND (bonds / F-fund) could not bust through those moving averages as I though they it could. Instead the economic data shot them down to the lower end of that support line, which also happens to be a bear flag, but it did manage to climb back to close just above that support. The bond market is bigger than the stock market and its traders are quite savvy, so you often see false breakouts or break downs that quickly reverse in the other direction, as you saw in early April, and a few more times that you'd see if I zoomed out to a longer term chart.
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
Market Commentary Archives
To get weekly or daily notifications when we post new commentary, sign up HERE.
Thanks so much for reading. Have a great weekend! l Should be back on Monday for a quick update.
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.
[TABLE="align: center"]
[TR]
[TD="align: center"]
[TD]
[/TD]
[TD="width: 338, align: center"] Daily TSP Funds Return
[TR]
[TD="align: right"][/TD]
[/TR]
[/TABLE]
[/TD]
[/TR]
[/TABLE]
The decline in bonds was bigger than a normal daily move because the economic data continues to come in stronger than expected, despite the Fed's relentless pursuit to try to slow down the economy, the labor market, and prices.
The bull flag on the 10-year yield (see below) did what a bull flag tends to do, thanks to that GDP and jobs data, but today we will get more key inflationary data with the PCE Pricing and Personal Spending reports. These could also be big bond yield movers, but which way?
The Fed has been acting as if they have been expecting the data to come in hot as they threatened more interest rate hikes, and yesterday's data certainly proved them right. So, with fodder for higher interest rates, it's interesting that stocks remain so buoyant, and perhaps it is the pre-holiday bullish bias.
Here's the breakout from the bull flag on the 10-year yield but it is hitting a double top and, as you'll see in the second chart...
... it is also hitting some long term resistance, although also a possible big bull flag. With today being the last day for money managers and pension funds to rebalance their portfolio allocations into bonds after stocks outperformed in the second quarter, it could be a good day for bonds, but if those economic reports come in too hot, maybe we'll actually see the opposite, despite the technical resistance on the two charts above.
Why is this important? I know bonds and the dollar are very boring but they can open and close doors for the stock market. A strong dollar and higher yields can be a headwind, although not a roadblock, to the stock market. Why risk your money in the more risky S&P 500 that is now paying a yield below 5% while you (not us TSPers, but bond investors) can get 5% or more guaranteed on a 10-year Treasury Note?
The big rally in the dollar yesterday was a roadblock for the I-fund yesterday. The 2-day rally in the dollar has been too much for the international stocks, and the fund lagged badly.
The July seasonality chart is quite green, particularly in the beginning of the month surrounding the 4th of July holiday.
Chart provided courtesy of www.sentimentrader.com
RevShark mentioned this the other day, "According To Mike Zaccardi, CFA, The Nasdaq 100 (QQQ) has been up in July for the last fifteen years in a row, and the average gain has been 4.7%. That is by far the best month for the QQQ. There is a very interesting statistic, but just remember it is a tendency and not a certainty."
I also heard yesterday that the market cap of Apple - just Apple - is larger than the entire Russell 2000 Index of ~ 2000 stocks. Too big to fail?
Can stocks continue to the torrid pace that we saw in the first half of 2023?
Holiday reversals are typical surrounding major holidays but that chart doesn't show much trouble before or after the 4th of July. However, sentiment is extreme on the bullish side again, stocks are fairly overbought, and I guess there's a chance that the post holiday action can reverse the pre-holiday action, which often happens around major holidays.
There will be a half day of trading on Monday with the stock market closing bell at 1 PM ET, and of course the stock market and TSP are closed on Tuesday. I will likely post just a brief commentary on Monday since most people will be off BBQing or at the beach. Enjoy!
The S&P 500 (C-fund) posted its 3rd day of gains yesterday after the 6-day pullback. A six day pullback is not the norm in a strong market so it is possible that this rally has been some holiday nudging, or fudging, but there's probably not much the bears will do about it until after the holiday - unless today's economic data shakes things up. It did find support at the 20-day EMA this weekend there's not much resistance until 4450.
DWCPF (S-fund) has been on fire since its sharp pullback, and it certainly looks like something that should be bought on dips, but given the economic situation of rising interest rates, the Fed reducing its balance sheet, the looming recession possibility, and the KRE Regional Bank index hitting and holding below its 50-day EMA resistance yesterday, there seems to be some headwinds. What's keeping it up?
BND (bonds / F-fund) could not bust through those moving averages as I though they it could. Instead the economic data shot them down to the lower end of that support line, which also happens to be a bear flag, but it did manage to climb back to close just above that support. The bond market is bigger than the stock market and its traders are quite savvy, so you often see false breakouts or break downs that quickly reverse in the other direction, as you saw in early April, and a few more times that you'd see if I zoomed out to a longer term chart.
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
Market Commentary Archives
To get weekly or daily notifications when we post new commentary, sign up HERE.
Thanks so much for reading. Have a great weekend! l Should be back on Monday for a quick update.
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.
