Stocks bounced right back from Monday's hiccup, and the rally off the recent lows resumed. The Dow gained 254-points but the indices closed very close to the opening bell highs, so they didn't make much headway after that opening rally. The recent investor sentiment, where investors quickly sold rallies, may be waning, but the stocks charts are not quite out of the woods yet. Bonds continue to struggle as the yield on the 10-year made another new high, and the 2/10 yield curve gets closer to inverting.
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That's the technical roadblock, but the fundamental obstacles are even more alarming. Let's say the S&P 500 makes its way back up to the January all time highs. What would that be telling us? It would say that the recent news of troubling inflation, the Fed's plan to raise interest rates seven times this year, the price of oil surging near $110 a barrel, bond yields (2/10 year) being close to inverting, and the potential for WWIII being real, can be dismissed and stock prices can go back to where they were before a lot of this trouble started. Does that makes sense? Not in a real world, but stocks have been in a long term bull market where historically high valuations have been the norm.
Yes, the market has been pulling back and adjusting for the rising interest rates, but once they correct, should they bounce right back or do we need to see more adjusting for this new reality? I've been fooled before, but right now I'm on the side that the bulls are the ones being fooled by this bounce. I could be swayed, however.
I've had a good month in the TSP funds having played for the relief rally as I had been talking about leading up to this week, but now I've backed off. I'm up about 7.5% in March but I am in no mood to give that back being that, if we are indeed in a bear market, gains could be tough to come by in 2022.
The yield on the 10-year Treasury is out in front of the Fed so it's pretty clear that the Fed is in a tough spot of trying to pull off a soft landing of keeping inflation from getting out of control by raising interest rates, while trying not to kill the economy by doing so. Yesterday the yield moved to a new high but perhaps up against some short-term resistance. It has gone almost straight up during the month of March, yet stocks have so far ignored this recent push.
The yield curve is flattening between the 2 and 10 year Treasury Notes as they move closer together.
The price of oil is also a major catalyst right now and the slight pullback yesterday may have helped the bulls push stocks higher, but the trend is up as it closed above resistance again.
The action in stocks has been encouraging and may need to be respected. It is certainly possible that the bear market is over, but the charts still have some overhead resistance in the way and the recent upside action may not be sustainable. If resistance gets taken out and holds, then it will be a different story.
The S&P 500 (C-fund) is back up near the top of its recent trading range and testing a key moving average right now that has been holding as resistance when the S&P is below it, and holding as support when it was above. We're seeing a lot of good things develop on the charts, but that's always the case when stocks are up sharply for 5 out of 6 days. We've seen rallies like this eventually fail this year, but this one may be the strongest yet so the bulls may be getting more brave. What happened to the bears?
The DWCPF (small caps / S-fund) gained another 1.5% and it is now up close to 11% off the March 14 lows, which was just 6 trading days ago. It's back above its 50-day EMA, which is a good sign being that it failed in February, so perhaps the small caps have something real going on here? The top of this trading range would be somewhere between 2030 and 2065.
The EFA (I-fund) also closed above its 50-day EMA as the overseas markets follow the lead of the U.S. indices. This has also been a 10% plus move off the lows as it heads into the meat of some resistance between 74 and 76. There is an open gap near 70.
BND (Bonds / F-fund) were down yet again as this bear market continues without question.
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 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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The action was good, no doubt, as the S&P 500 makes its way up to the top of the recent trading range, and coming up to a meaningful moving average. This is where the bears, if they are still around, could make their move.
That's the technical roadblock, but the fundamental obstacles are even more alarming. Let's say the S&P 500 makes its way back up to the January all time highs. What would that be telling us? It would say that the recent news of troubling inflation, the Fed's plan to raise interest rates seven times this year, the price of oil surging near $110 a barrel, bond yields (2/10 year) being close to inverting, and the potential for WWIII being real, can be dismissed and stock prices can go back to where they were before a lot of this trouble started. Does that makes sense? Not in a real world, but stocks have been in a long term bull market where historically high valuations have been the norm.
Yes, the market has been pulling back and adjusting for the rising interest rates, but once they correct, should they bounce right back or do we need to see more adjusting for this new reality? I've been fooled before, but right now I'm on the side that the bulls are the ones being fooled by this bounce. I could be swayed, however.
I've had a good month in the TSP funds having played for the relief rally as I had been talking about leading up to this week, but now I've backed off. I'm up about 7.5% in March but I am in no mood to give that back being that, if we are indeed in a bear market, gains could be tough to come by in 2022.
The yield on the 10-year Treasury is out in front of the Fed so it's pretty clear that the Fed is in a tough spot of trying to pull off a soft landing of keeping inflation from getting out of control by raising interest rates, while trying not to kill the economy by doing so. Yesterday the yield moved to a new high but perhaps up against some short-term resistance. It has gone almost straight up during the month of March, yet stocks have so far ignored this recent push.
The yield curve is flattening between the 2 and 10 year Treasury Notes as they move closer together.
The price of oil is also a major catalyst right now and the slight pullback yesterday may have helped the bulls push stocks higher, but the trend is up as it closed above resistance again.
The action in stocks has been encouraging and may need to be respected. It is certainly possible that the bear market is over, but the charts still have some overhead resistance in the way and the recent upside action may not be sustainable. If resistance gets taken out and holds, then it will be a different story.
The S&P 500 (C-fund) is back up near the top of its recent trading range and testing a key moving average right now that has been holding as resistance when the S&P is below it, and holding as support when it was above. We're seeing a lot of good things develop on the charts, but that's always the case when stocks are up sharply for 5 out of 6 days. We've seen rallies like this eventually fail this year, but this one may be the strongest yet so the bulls may be getting more brave. What happened to the bears?
The DWCPF (small caps / S-fund) gained another 1.5% and it is now up close to 11% off the March 14 lows, which was just 6 trading days ago. It's back above its 50-day EMA, which is a good sign being that it failed in February, so perhaps the small caps have something real going on here? The top of this trading range would be somewhere between 2030 and 2065.
The EFA (I-fund) also closed above its 50-day EMA as the overseas markets follow the lead of the U.S. indices. This has also been a 10% plus move off the lows as it heads into the meat of some resistance between 74 and 76. There is an open gap near 70.
BND (Bonds / F-fund) were down yet again as this bear market continues without question.
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 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.
