Stocks opened lower on Thursday and never really made much of an attempt to into positive territory, although small caps showed some relative strength with yields falling. Big tech tech earnings have been good, but not good enough apparently, to justify how much they have been outperforming the rest of the market in recent months. Seasonality improves going forward, just as we see some indications that the 2023 bull market may be on its last legs.
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Despite a stronger than expected GDP report for the third quarter (4.9%), stocks fell and the bond market rallied (yields went down). That was the opposite of what I'd expected when we get an indication of stronger economic growth than anticipated. Stronger growth could be concerning for those worried about the Fed raising rates again, but they have basically said that they are done for the year.
Of course the Q3 GDP is an indicator of what happened in the third quarter, and we're now in the 4th quarter, so the market may be looking ahead. The talk and fear of a recession is getting more fervent, but there are plenty of data that refutes it now, so it is all speculation.
If there is a contrarian viewpoint of this strong GDP figure it is that, outside of the COVID recovery from the COVID economic crash, when the GDP does get to this level near 4 or 5%, it tends to be peaking.
The bond market is in a - damned if we do, damned if we don't - environment right now. If bond yields go up, investors are crying that they are too high and it's going to kill growth. If they go down investors seem concerned about it being a reaction to recession concerns.
Yesterday the 10-year Treasury Yield was down nicely, despite the strong GDP numbers, but that didn't appease investors as they were busy selling stocks again.
The dollar didn't relent as it made a new closing high yesterday.
Amazon reported earnings after the bell yesterday and it crushed estimates, but the market isn't overly impressed as it was trading flat after an initial rally after hours. This is similar to other strong magnificent 7 reactions. Did you see what happened to Microsoft yesterday, after rally on big earnings on Wednesday? It lost all of gains, and then some.
Today is the last day of one of more negative periods in October, and seasonality will improve greatly after the weekend. That doesn't mean that stocks will go up, but they now have a bullish bias to help put a breeze at the backs of the stock market going forward.
Chart provided courtesy of www.sentimentrader.com
Admin note: I will be leaving my office after the TSP deadline on Friday, so I won't be available for several hours, but I will catch up on email and get the AutoTracker updated later in the evening. Sorry for any inconvenience.
The S&P 500 (C-fund) tumbled again as the big tech earnings have not been enough to impress investors, and without big tech to hold up the indices, the charts are breaking. As I said, seasonality gets better going forward and stocks are due for a bounce, but as for the state of the market based on the charts, it's getting less easy to like. A bounce back up to the moving averages is always possible during a relief rally, but it gets tough to get back above them.
DWCPF (S-fund) held up better yesterday although it gave up a decent early gain as stocks fell into the closing bell. The open gap from May 4th and 5th is still in play as DWCPF closed right at the level of the May 4th close. It did close below the descending channel for a second straight. That could be a sign of being oversold, and we could see a bounce, but the bears have been quick to sell the bounces.
EFA (I-fund) was victim of a new high for the dollar and of course the weakness US stock market. It closed slightly better than the S&P 500 but the downtrend is clear. A bounce back within the channel is possible, and maybe likely, but there is a ton of resistance up near 69 so we may need to be nimble if in the I-fund.
BND (bonds / F-fund) rallied again as yields move back and forth this week. The gap is still open and there for the taking, and again a rally in bonds could be an indication of a few things: Either a bet against the economy, a move to "safety" (money moving from stocks to bonds), locking in higher yields, or inflationary conditions are subsiding. Just like stocks however, the larger trend is down.
Thanks so much for reading! Have a great weekend!
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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[TD="width: 338, align: center"] Daily TSP Funds Return
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Despite a stronger than expected GDP report for the third quarter (4.9%), stocks fell and the bond market rallied (yields went down). That was the opposite of what I'd expected when we get an indication of stronger economic growth than anticipated. Stronger growth could be concerning for those worried about the Fed raising rates again, but they have basically said that they are done for the year.
Of course the Q3 GDP is an indicator of what happened in the third quarter, and we're now in the 4th quarter, so the market may be looking ahead. The talk and fear of a recession is getting more fervent, but there are plenty of data that refutes it now, so it is all speculation.
If there is a contrarian viewpoint of this strong GDP figure it is that, outside of the COVID recovery from the COVID economic crash, when the GDP does get to this level near 4 or 5%, it tends to be peaking.
The bond market is in a - damned if we do, damned if we don't - environment right now. If bond yields go up, investors are crying that they are too high and it's going to kill growth. If they go down investors seem concerned about it being a reaction to recession concerns.
Yesterday the 10-year Treasury Yield was down nicely, despite the strong GDP numbers, but that didn't appease investors as they were busy selling stocks again.
The dollar didn't relent as it made a new closing high yesterday.
Amazon reported earnings after the bell yesterday and it crushed estimates, but the market isn't overly impressed as it was trading flat after an initial rally after hours. This is similar to other strong magnificent 7 reactions. Did you see what happened to Microsoft yesterday, after rally on big earnings on Wednesday? It lost all of gains, and then some.
Today is the last day of one of more negative periods in October, and seasonality will improve greatly after the weekend. That doesn't mean that stocks will go up, but they now have a bullish bias to help put a breeze at the backs of the stock market going forward.
Chart provided courtesy of www.sentimentrader.com
Admin note: I will be leaving my office after the TSP deadline on Friday, so I won't be available for several hours, but I will catch up on email and get the AutoTracker updated later in the evening. Sorry for any inconvenience.
The S&P 500 (C-fund) tumbled again as the big tech earnings have not been enough to impress investors, and without big tech to hold up the indices, the charts are breaking. As I said, seasonality gets better going forward and stocks are due for a bounce, but as for the state of the market based on the charts, it's getting less easy to like. A bounce back up to the moving averages is always possible during a relief rally, but it gets tough to get back above them.
DWCPF (S-fund) held up better yesterday although it gave up a decent early gain as stocks fell into the closing bell. The open gap from May 4th and 5th is still in play as DWCPF closed right at the level of the May 4th close. It did close below the descending channel for a second straight. That could be a sign of being oversold, and we could see a bounce, but the bears have been quick to sell the bounces.
EFA (I-fund) was victim of a new high for the dollar and of course the weakness US stock market. It closed slightly better than the S&P 500 but the downtrend is clear. A bounce back within the channel is possible, and maybe likely, but there is a ton of resistance up near 69 so we may need to be nimble if in the I-fund.
BND (bonds / F-fund) rallied again as yields move back and forth this week. The gap is still open and there for the taking, and again a rally in bonds could be an indication of a few things: Either a bet against the economy, a move to "safety" (money moving from stocks to bonds), locking in higher yields, or inflationary conditions are subsiding. Just like stocks however, the larger trend is down.
Thanks so much for reading! Have a great weekend!
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.
