The new week starts out with new highs in the Dow, S&P 500, and Nasdaq, and small caps came along for the ride leading on the upside. Trading volume was on the light side as we get closer to this week's major earnings announcements and the Fed's decision on interest rates. Bonds did well as yields slipped lower, and the dollar was up holding the I-fund back a bit.
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The Nasdaq saw 4 to 1 advancing trading volume to declining, and that's in front of today earnings from Microsoft, which reports after the closing bell today. Yahoo's Earnings Calendar says that Alphabet (aka Google) reports tomorrow but CNBC and the Nasdaq website says it is today, so it probably is today, but I guess we'll find out.
A double dose of good or bad reports could ignite the market in one direction or the other, but with the S&P 500 so extended, we could see some profit taking on any big rally with the other earnings reports in the wings. Throw the Fed in there on Wednesday and it's going to be a wild week.
Lower yields helped the small caps again yesterday but the 10-year Treasury Yield is back down to the bottom of its recent range - between the 50 and the 200-day EMAs, although there is room below in the blue trading channel. It may be the Fed who breaks this range, whichever way that may be.
It's a busy week and this can play out in a few ways. Good earnings may lead to a big rally, or they might also lead to a "sell the news" profit taking reaction since big tech is quite stretched to the upside heading into these reports. Poor earnings is likely to lead to selling since the S&P and Nasdaq are basically priced for perfection.
The Fed is capable of igniting a new leg higher in stocks, or killing the current rally. No change in interest rates are expected today but they will likely give clues as to future expectations, and with the market pricing in several cuts this year already, there is a chance of a let down.
Add these two together and it could be a major catalyst for stocks, or a wash that keeps the recent consolidation going, especially in the small caps and I fund, although yesterday's rally pushed both the S-fund and the I-funds up toward the previous highs so a double top pullback is possible if the news doesn't push them to new highs.
I think the last thing investors were expecting yesterday, the day before the release of major earnings, was a big rally in the extended S&P 500 (C-fund). Does that set up a sell the news reaction - even if the earnings are strong? Maybe, but this could be part of the melt-up that we can say started back in October since we haven't had a pullback of any significance since. The PMO indicator is showing a negative divergence with it making a lower highs and the S&P making new highs, but it is back above its moving average, which is a generally bullish sign. Trading volume was very light.
DWCPF (S-fund) is acting well lately and a test of the recent highs is within reach. Whether or not we like small caps fundamentally, the only thing not to like about this chart is the possibility of a bearish double top reaction, but double top pullbacks are usually temporary.
Same for the EFA (I-fund). New highs should be tested soon, but can it breakout without experiencing a typical double top pullback? The dollar will have a say in this, but the dollar's influence is built into this chart already.
BND (bonds, F-fund) is building a nice looking bull flag as it chops around between those short-term trend lines. These flags typically break to the upside, so that suggests the Fed could be favorable later this week, but there's no guarantees. They could surprise us all.
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 Nasdaq saw 4 to 1 advancing trading volume to declining, and that's in front of today earnings from Microsoft, which reports after the closing bell today. Yahoo's Earnings Calendar says that Alphabet (aka Google) reports tomorrow but CNBC and the Nasdaq website says it is today, so it probably is today, but I guess we'll find out.
A double dose of good or bad reports could ignite the market in one direction or the other, but with the S&P 500 so extended, we could see some profit taking on any big rally with the other earnings reports in the wings. Throw the Fed in there on Wednesday and it's going to be a wild week.
Lower yields helped the small caps again yesterday but the 10-year Treasury Yield is back down to the bottom of its recent range - between the 50 and the 200-day EMAs, although there is room below in the blue trading channel. It may be the Fed who breaks this range, whichever way that may be.
It's a busy week and this can play out in a few ways. Good earnings may lead to a big rally, or they might also lead to a "sell the news" profit taking reaction since big tech is quite stretched to the upside heading into these reports. Poor earnings is likely to lead to selling since the S&P and Nasdaq are basically priced for perfection.
The Fed is capable of igniting a new leg higher in stocks, or killing the current rally. No change in interest rates are expected today but they will likely give clues as to future expectations, and with the market pricing in several cuts this year already, there is a chance of a let down.
Add these two together and it could be a major catalyst for stocks, or a wash that keeps the recent consolidation going, especially in the small caps and I fund, although yesterday's rally pushed both the S-fund and the I-funds up toward the previous highs so a double top pullback is possible if the news doesn't push them to new highs.
I think the last thing investors were expecting yesterday, the day before the release of major earnings, was a big rally in the extended S&P 500 (C-fund). Does that set up a sell the news reaction - even if the earnings are strong? Maybe, but this could be part of the melt-up that we can say started back in October since we haven't had a pullback of any significance since. The PMO indicator is showing a negative divergence with it making a lower highs and the S&P making new highs, but it is back above its moving average, which is a generally bullish sign. Trading volume was very light.
DWCPF (S-fund) is acting well lately and a test of the recent highs is within reach. Whether or not we like small caps fundamentally, the only thing not to like about this chart is the possibility of a bearish double top reaction, but double top pullbacks are usually temporary.
Same for the EFA (I-fund). New highs should be tested soon, but can it breakout without experiencing a typical double top pullback? The dollar will have a say in this, but the dollar's influence is built into this chart already.
BND (bonds, F-fund) is building a nice looking bull flag as it chops around between those short-term trend lines. These flags typically break to the upside, so that suggests the Fed could be favorable later this week, but there's no guarantees. They could surprise us all.
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.
