A little more backing and filling in the indices yesterday in front of today's important PCE Prices and Personal Income / Spending reports. The Dow was down 23-points but actually closed at the highs of the day, while the S&P 500 and Nasdaq were choppy and posted modest to moderate losses. The S and I-funds were down as well and lagged the large caps returns as they were trying to fill in some recently opened gaps. Bonds were up as yields slipped lower, and the dollar was up.
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The estimate for the PCE Prices report is for a rise in prices of 0.4% in January, which is following December's increase of 0.2% so it is inching higher. The market has likely priced this in already so the market reaction will depend on how close to this 0.4% number that we get. Personal Income is expected to have risen by 0.5%, and Spending is expected to be 0.2%.
Here's the chart of the PCE year over year chart showing how it has come down dramatically since the 2022 peak, so we really do not want to see this tick up otherwise we could see yields shoot higher again. That would likely give the stock market a reason to sell off since this is the Fed's favorite inflation indicator, and if it comes in hot we can forget about seeing any interest cuts anytime soon.
The 10-year Treasury Yield is currently churning in the 4.3% area, which seems to be acceptable to the stock market, but if that blue bull flag breaks out on the PCE report, we could be looking at 4.4% or higher, and that may not be acceptable. Not that 4.5% is too high, but it would be moving in the wrong direction, and direction is often more important than the level.
The dollar was up slightly yesterday adding the pressure on stock prices. The concern here is that 20-day EMA held as support and this week it broke above the short-term descending resistance line. However, there is some additional resistance near 28.1 on the UUP chart.
This data from our forum member JTH showed us that, over the last 63 years, the S&P 500 was positive in both January and February 24 times. After those 24 times, March was positive 18 times, or 75% of the time with an average gain of 2.66%.
Source: JTH Account Talk thread in TSP Talk Forum
By the way, JTH posts this type of interesting data in his thread every weekday morning. It's a must read for me.
In the same vein, sentimenTrader shows us what happened at different time frames after the S&P 500 was up 15 or more weeks in the previous 17 weeks, which is the streak we are in right now:
Data provided courtesy of www.sentimentrader.com
It looks like congress kicked this Friday's spending bill deadline down the road a bit again, but not far down the road, so we'll be dealing with this in March again.
The S&P 500 (C-fund) has been drifting lower for a few days and that's fine after the giant Nvidia driven rally last week. There is a lot of possible support levels between 4990 and 5050 - the bottom of the large open gap, but if 4990 fails, there's a lot of open air on the downside. Either the trend holds or it doesn't but as of now it is holding and they tell me the trend is our friend, right?
DWCPF (S-fund) was down moderately yesterday giving up about half of Tuesday's gains. But in the process it filled Tuesday's open gap so the dip was productive. The problem is, there's another gap down near 1965 that could also come into play in the short-term. As I mentioned above, a hot PCE report could slam this chart down to fill that gap, but if it holds and closes strongly, that would strengthen that congested support area between 1965 and 1980.
The EFA (I-fund) was down yesterday and it too is staring at last week's open gap. There's a little more support below that gap, and overall this is a good looking chart as long as that support holds.
BND (bonds / F-fund) rallied back up to the 50-day EMA and stalled again. Perhaps today's PCE report will make or break this chart and either push it above the 50-day EMA, or below that new support line near 71.90.
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
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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The estimate for the PCE Prices report is for a rise in prices of 0.4% in January, which is following December's increase of 0.2% so it is inching higher. The market has likely priced this in already so the market reaction will depend on how close to this 0.4% number that we get. Personal Income is expected to have risen by 0.5%, and Spending is expected to be 0.2%.
Here's the chart of the PCE year over year chart showing how it has come down dramatically since the 2022 peak, so we really do not want to see this tick up otherwise we could see yields shoot higher again. That would likely give the stock market a reason to sell off since this is the Fed's favorite inflation indicator, and if it comes in hot we can forget about seeing any interest cuts anytime soon.
The 10-year Treasury Yield is currently churning in the 4.3% area, which seems to be acceptable to the stock market, but if that blue bull flag breaks out on the PCE report, we could be looking at 4.4% or higher, and that may not be acceptable. Not that 4.5% is too high, but it would be moving in the wrong direction, and direction is often more important than the level.
The dollar was up slightly yesterday adding the pressure on stock prices. The concern here is that 20-day EMA held as support and this week it broke above the short-term descending resistance line. However, there is some additional resistance near 28.1 on the UUP chart.
This data from our forum member JTH showed us that, over the last 63 years, the S&P 500 was positive in both January and February 24 times. After those 24 times, March was positive 18 times, or 75% of the time with an average gain of 2.66%.
Source: JTH Account Talk thread in TSP Talk Forum
By the way, JTH posts this type of interesting data in his thread every weekday morning. It's a must read for me.
In the same vein, sentimenTrader shows us what happened at different time frames after the S&P 500 was up 15 or more weeks in the previous 17 weeks, which is the streak we are in right now:
Data provided courtesy of www.sentimentrader.com
It looks like congress kicked this Friday's spending bill deadline down the road a bit again, but not far down the road, so we'll be dealing with this in March again.
The S&P 500 (C-fund) has been drifting lower for a few days and that's fine after the giant Nvidia driven rally last week. There is a lot of possible support levels between 4990 and 5050 - the bottom of the large open gap, but if 4990 fails, there's a lot of open air on the downside. Either the trend holds or it doesn't but as of now it is holding and they tell me the trend is our friend, right?
DWCPF (S-fund) was down moderately yesterday giving up about half of Tuesday's gains. But in the process it filled Tuesday's open gap so the dip was productive. The problem is, there's another gap down near 1965 that could also come into play in the short-term. As I mentioned above, a hot PCE report could slam this chart down to fill that gap, but if it holds and closes strongly, that would strengthen that congested support area between 1965 and 1980.
The EFA (I-fund) was down yesterday and it too is staring at last week's open gap. There's a little more support below that gap, and overall this is a good looking chart as long as that support holds.
BND (bonds / F-fund) rallied back up to the 50-day EMA and stalled again. Perhaps today's PCE report will make or break this chart and either push it above the 50-day EMA, or below that new support line near 71.90.
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
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.
