Stocks were moving higher in early trading on Wednesday but readers were bracing for the Fed's latest policy statement and press conference which turned things around and stocks closed sharply lower. The Dow lost a moderate 77-points or 0.22% but the larger broader indices were more indicative of the bearish day we had. Surprisingly, small caps outperformed large caps slightly as key support held, and the economically sensitive Transportation Index gave up a big gain, but did not close negative.
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I'll get that out of the way first since there was an important earning release after the bell that will directly impact the Transportation Index. FedEx was up nearly 6% last I checked after the bell last night and that could help this chart, which did not closer lower, and held Tuesday's reversal low. This is a possible bright spot but clearly there are more issues involved.
FOMC days with the policy statement and presser are draining if you watch. You never know which knee-jerk reaction is real or a temporary move away from which way it really wants to go. There was no change to interest rates yesterday as expected and the reaction was obviously negative when all was said and done by the close, but that's not always the full picture. Here is a chart with this year's FOMC meeting days noted and what happened afterward. Sometimes stocks were down on the day and kept going down. Sometimes they were down on the day, but reversed high right afterward. Sometimes stocks were up, but reversed down afterward. You never know, and we may not know for a couple of days what yesterday's selling will eventually lead to.
Some charts were cracked by the action while others came right down to potential support, so I'm not making any calls just yet about what yesterday's action meant, nor about what the Fed said outside of an understanding that they appeared about as hawkish as was expected, if not a little more so. We all remember the fall of 2021 call from the Fed when they said inflation was transitory, suggesting it was not going to be a problem. Fast forward 18 months and interest rates have been raised 11 times in an attempt to stop the "transitory" inflation which turned out to be far from benign. So, they can be wrong. And, the reaction in stocks is not always an indication of the next direction.
The 10-year Treasury Yield was surprisingly quiet yesterday, and actually moved down on the day as the chart, which was hinting that a possible double top pullback was in order, did not make a higher high and may now be ready for that pullback. If the Fed couldn't do it with their hawkish rhetoric...
The dollar was down early and that filled in the open gap from last week, but it did not go any higher than the recent highs, and we may have a flat top peaking look going on here as well. This would be positive for stocks, but obviously only if those prior highs in those two charts hold.
I won't dive into what the Fed said because, like the "Transitory" statement, it doesn't mean that much to me. What matters to me is what the market, via the charts, is trying to tell us.
The S&P 500 (C-fund) sold off nearly 1% on an emotional Federal Reserve meeting day. The lows and the close were not particularly favorable as it fell further below the 50-day EMA and the longer term rising support line, but what do I see there in blue? Is that a bull flag? There are certainly concerns and cracks in the technical picture all over the charts, but if this can bounce today and get back above that red dashed line, the bulls may have a reason to do some buying. Whether it works for the long term or just a few days, I don't know, but this chart isn't dead just yet. On the other hand, like the small caps' chart, there is a large head and shoulders pattern and the neckline is currently all the way down near 4350.
DWCPF (S-fund) was down after spending much of the day solidly in the green, but the Fed changed that direction and here it is testing the 200-day EMA and near the neckline of its head and shoulder pattern. If there is going to be a post-Fed reversal, this would be a good area for that to start.
EFA was down 0.24% yesterday but because the overseas markets were closed by the time the Fed did their thing, and most of the European markets were higher yesterday, the TSP could play with the I-fund price, which hasn't been posted yet for Wednesday at the time of this writing. We'll address it tomorrow.
BND (Bonds / F-fund) was down but nothing serious as longer term yields were actually down on the day. The gap remains open and one of the support lines that I have been watching is being tested now. 70.50 looks like a place that could trigger some buying in bonds, otherwise a break below that would be ugly for bonds and the F-fund.
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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I'll get that out of the way first since there was an important earning release after the bell that will directly impact the Transportation Index. FedEx was up nearly 6% last I checked after the bell last night and that could help this chart, which did not closer lower, and held Tuesday's reversal low. This is a possible bright spot but clearly there are more issues involved.
FOMC days with the policy statement and presser are draining if you watch. You never know which knee-jerk reaction is real or a temporary move away from which way it really wants to go. There was no change to interest rates yesterday as expected and the reaction was obviously negative when all was said and done by the close, but that's not always the full picture. Here is a chart with this year's FOMC meeting days noted and what happened afterward. Sometimes stocks were down on the day and kept going down. Sometimes they were down on the day, but reversed high right afterward. Sometimes stocks were up, but reversed down afterward. You never know, and we may not know for a couple of days what yesterday's selling will eventually lead to.
Some charts were cracked by the action while others came right down to potential support, so I'm not making any calls just yet about what yesterday's action meant, nor about what the Fed said outside of an understanding that they appeared about as hawkish as was expected, if not a little more so. We all remember the fall of 2021 call from the Fed when they said inflation was transitory, suggesting it was not going to be a problem. Fast forward 18 months and interest rates have been raised 11 times in an attempt to stop the "transitory" inflation which turned out to be far from benign. So, they can be wrong. And, the reaction in stocks is not always an indication of the next direction.
The 10-year Treasury Yield was surprisingly quiet yesterday, and actually moved down on the day as the chart, which was hinting that a possible double top pullback was in order, did not make a higher high and may now be ready for that pullback. If the Fed couldn't do it with their hawkish rhetoric...
The dollar was down early and that filled in the open gap from last week, but it did not go any higher than the recent highs, and we may have a flat top peaking look going on here as well. This would be positive for stocks, but obviously only if those prior highs in those two charts hold.
I won't dive into what the Fed said because, like the "Transitory" statement, it doesn't mean that much to me. What matters to me is what the market, via the charts, is trying to tell us.
The S&P 500 (C-fund) sold off nearly 1% on an emotional Federal Reserve meeting day. The lows and the close were not particularly favorable as it fell further below the 50-day EMA and the longer term rising support line, but what do I see there in blue? Is that a bull flag? There are certainly concerns and cracks in the technical picture all over the charts, but if this can bounce today and get back above that red dashed line, the bulls may have a reason to do some buying. Whether it works for the long term or just a few days, I don't know, but this chart isn't dead just yet. On the other hand, like the small caps' chart, there is a large head and shoulders pattern and the neckline is currently all the way down near 4350.
DWCPF (S-fund) was down after spending much of the day solidly in the green, but the Fed changed that direction and here it is testing the 200-day EMA and near the neckline of its head and shoulder pattern. If there is going to be a post-Fed reversal, this would be a good area for that to start.
EFA was down 0.24% yesterday but because the overseas markets were closed by the time the Fed did their thing, and most of the European markets were higher yesterday, the TSP could play with the I-fund price, which hasn't been posted yet for Wednesday at the time of this writing. We'll address it tomorrow.
BND (Bonds / F-fund) was down but nothing serious as longer term yields were actually down on the day. The gap remains open and one of the support lines that I have been watching is being tested now. 70.50 looks like a place that could trigger some buying in bonds, otherwise a break below that would be ugly for bonds and the F-fund.
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.
