Stocks opened sharply lower on Monday morning, and the futures were painting an even darker picture than what happened, because once the open bell rang we did see some dip buying and stabilization as the day wore on as Mexico and Canada negotiated the proposed tariffs, delaying the start day by a month. We still had some sharp losses, and while the rebound off the lows was a relief, the charts did take on some damage.
I won't bore you more tariff talk since everyone else in the world is talking about. What I'm concerned about is how the market is going to deal with it. I did appreciate the rebound yesterday as I have exposure to the stock funds, but as we look at the index charts you will see that there are some concerns.
I always found it interesting when the market moved dramatically on a news headline, and then quickly erased the losses, or in Monday's case, eased off the lows. That move, even if erased, is still an influence on the near-term action. Have you been around long enough to remember the flash crash of 2010 that sent the Dow down 1000-points, or 9%, within minutes during the trading day? By the close that day, the Dow was down only about 350 so it gained back 650, and it turned out it was a rogue trader that influenced the indices. There's a documentary out on this but my point is that it came out of nowhere, yet after we realized what it was, it didn't stop the market from not only retesting those May 6 lows, but the market, which had just been at a 52-week high the week before, trended lower for two months after that. All seemingly triggered by an odd news related event.
So, while I remain fairly bullish on stocks for the year, it wouldn't surprise me if yesterday's action is the start of some kind of a meaningful pullback, and it's not like we're not due for one. We haven't had a 10% pullback in the S&P 500 for a couple of years.
It may or may not resume going down today, and while I hope I am wrong, we could see some profit taking in near-term rallies, just until the smoke has cleared.
Bond yields were down - bond prices up, and with gold up as well, we saw the safety trade kick in the first time in a while. The 10-year Treasury yield was down sharply on Monday morning, but it found support just below its 50-day EMA. We've been watching that 4.5% area for key support that could make or break the bond market. A move below support in the yield would help the F-fund.
The dollar rallied on the tariff news, and left the I-fund behind. I was considering adding some I-fund after its recent breakout, but yesterday's losses put it back into its descending channel.
ACWX (the I-fund tracking index) was down 0.98% yesterday and the I-fund was given a loss of 1.25% - some was a carryover from Friday. The decline did help fill in one of the open gaps within that channel, and there is another open gap down below so that's a negative possibility.
The Dow Transportation Index planted another kangaroo reversal tail below the 200-day moving average - and it held again. That's the good news.
The bad news is the head and shoulder patterns are showing up, and a head and shoulders inside a right shoulder is even more concerning. That red right shoulder could fill out in any short term relief rally, but this has to get back above about 16,300 in the coming days or the odds of a major breakdown in this chart increases dramatically.
One quiet positive development yesterday was the Atlanta Fed raising their 1st quarter GDP estimate from +2.9% to +3.9%. They had posted that +2.9% initial estimate just this past Friday. It seems odd considering the situation over the weekend, so I am curious if the tariff situation changed anything.
Palantir reported earnings after the bell yesterday and it was soaring in after hours trading, so that could bode well for other A-I stocks today. Alphabet (GOOG) will report earnings after the bell today, and Amazon reports on Thursday. The January jobs report comes out on Friday.
Admin Note: The January TSP Talk AutoTracker winners have been posted in the forum. Congratulations to MRJ and David for their gains of 7.47% and 6.46% gains in the month respectively. Also, our Intrepid Timer service came in 3rd with a gain of 6.32% to get him, and anyone who may have mimicked those trades, off to great start in 2025. The S-fund led the TSP funds with a gain of 4.99% in January. Get in on the action - it's free!
The S&P 500 (C-fund) gapped down on Monday but nearly filled the gap by the end of the day. That was impressive given the severity of the futures on Sunday night, but once that gap fills the psychology of investors recouping those early Monday losses could trigger some selling again as they get to say, "I'm even." That's basically what happened on Friday after that blue gap was filled. Some fortunate traders were able to sell near the all time highs on Friday before the afternoon sell off, and that's a good feeling. Look for that to potentially repeat some time this week.
The PMO momentum indicator on the bottom is showing a negative divergence as it was much lower at the recent highs than it was at the prior highs.
DWCPF (S-fund) has its own issues after failing at the 2400 area a couple of times last week, then gapping down on Monday. It did find support at the top of the January 15th gap, but that's not a fill. We don't have an official change in trend but the lower highs are getting more developed.
BND (bonds / F-fund) was up modestly as the 50-day EMA just continues to hold as support, despite the open gaps below it. It tested the top of the trading channel so it could have some resistance coming up. A breakout above that blue line near 72.50 could be big, but it's tough to assume a breakout.
Thanks so much for reading! We'll see you back here tomorrow.
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
Questions, comments, or issues with today's commentary? We can discuss it in the Forum.
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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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You can see the latest updated TSP share prices and returns, usually posted daily by 8:30 PM ET here: https://www.tsptalk.com/tsp_share_prices.phpI won't bore you more tariff talk since everyone else in the world is talking about. What I'm concerned about is how the market is going to deal with it. I did appreciate the rebound yesterday as I have exposure to the stock funds, but as we look at the index charts you will see that there are some concerns.
I always found it interesting when the market moved dramatically on a news headline, and then quickly erased the losses, or in Monday's case, eased off the lows. That move, even if erased, is still an influence on the near-term action. Have you been around long enough to remember the flash crash of 2010 that sent the Dow down 1000-points, or 9%, within minutes during the trading day? By the close that day, the Dow was down only about 350 so it gained back 650, and it turned out it was a rogue trader that influenced the indices. There's a documentary out on this but my point is that it came out of nowhere, yet after we realized what it was, it didn't stop the market from not only retesting those May 6 lows, but the market, which had just been at a 52-week high the week before, trended lower for two months after that. All seemingly triggered by an odd news related event.
So, while I remain fairly bullish on stocks for the year, it wouldn't surprise me if yesterday's action is the start of some kind of a meaningful pullback, and it's not like we're not due for one. We haven't had a 10% pullback in the S&P 500 for a couple of years.
It may or may not resume going down today, and while I hope I am wrong, we could see some profit taking in near-term rallies, just until the smoke has cleared.
Bond yields were down - bond prices up, and with gold up as well, we saw the safety trade kick in the first time in a while. The 10-year Treasury yield was down sharply on Monday morning, but it found support just below its 50-day EMA. We've been watching that 4.5% area for key support that could make or break the bond market. A move below support in the yield would help the F-fund.
The dollar rallied on the tariff news, and left the I-fund behind. I was considering adding some I-fund after its recent breakout, but yesterday's losses put it back into its descending channel.
ACWX (the I-fund tracking index) was down 0.98% yesterday and the I-fund was given a loss of 1.25% - some was a carryover from Friday. The decline did help fill in one of the open gaps within that channel, and there is another open gap down below so that's a negative possibility.
The Dow Transportation Index planted another kangaroo reversal tail below the 200-day moving average - and it held again. That's the good news.
The bad news is the head and shoulder patterns are showing up, and a head and shoulders inside a right shoulder is even more concerning. That red right shoulder could fill out in any short term relief rally, but this has to get back above about 16,300 in the coming days or the odds of a major breakdown in this chart increases dramatically.
One quiet positive development yesterday was the Atlanta Fed raising their 1st quarter GDP estimate from +2.9% to +3.9%. They had posted that +2.9% initial estimate just this past Friday. It seems odd considering the situation over the weekend, so I am curious if the tariff situation changed anything.
Palantir reported earnings after the bell yesterday and it was soaring in after hours trading, so that could bode well for other A-I stocks today. Alphabet (GOOG) will report earnings after the bell today, and Amazon reports on Thursday. The January jobs report comes out on Friday.
Admin Note: The January TSP Talk AutoTracker winners have been posted in the forum. Congratulations to MRJ and David for their gains of 7.47% and 6.46% gains in the month respectively. Also, our Intrepid Timer service came in 3rd with a gain of 6.32% to get him, and anyone who may have mimicked those trades, off to great start in 2025. The S-fund led the TSP funds with a gain of 4.99% in January. Get in on the action - it's free!
The S&P 500 (C-fund) gapped down on Monday but nearly filled the gap by the end of the day. That was impressive given the severity of the futures on Sunday night, but once that gap fills the psychology of investors recouping those early Monday losses could trigger some selling again as they get to say, "I'm even." That's basically what happened on Friday after that blue gap was filled. Some fortunate traders were able to sell near the all time highs on Friday before the afternoon sell off, and that's a good feeling. Look for that to potentially repeat some time this week.
The PMO momentum indicator on the bottom is showing a negative divergence as it was much lower at the recent highs than it was at the prior highs.
DWCPF (S-fund) has its own issues after failing at the 2400 area a couple of times last week, then gapping down on Monday. It did find support at the top of the January 15th gap, but that's not a fill. We don't have an official change in trend but the lower highs are getting more developed.
BND (bonds / F-fund) was up modestly as the 50-day EMA just continues to hold as support, despite the open gaps below it. It tested the top of the trading channel so it could have some resistance coming up. A breakout above that blue line near 72.50 could be big, but it's tough to assume a breakout.
Thanks so much for reading! We'll see you back here tomorrow.
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
Questions, comments, or issues with today's commentary? We can discuss it in the Forum.
Daily Market Commentary Archives
For more info our other premium services, please go here... www.tsptalk.com/premiums.php
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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