Stocks were mixed on Thursday with Dow slipping 12-points and the small caps taking a rare hit, while the S&P 500 was flat, and the Nasdaq was up sharply. The bears seem to be lurking, and waiting for the occasional scrap to be thrown their way, as in the case of small caps yesterday, but for the most part the bulls have remained fully in charge. Bonds were down, as was the dollar.
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Yesterday we talked about valuations and how stimulus seems to be the market catalyst, rather than those stock price valuations, and history does suggest that economic stimulus is a driving force for the stocks market, but sometimes things can go too far and eventually we get a great awaking and a major decline in stocks to remind us of the consequences of going too far.
The victim of this stimulus tends to be the dollar, and a falling dollar does push prices higher - in many things, not just stock prices. Here's what has happened to the dollar since the Fed started to increase their balance sheets, and talks of government stimulus took over the market near those March stock market lows.
And here is that Fed Money Supply that it has been throwing at the market. This chart goes back to 2018 when the angle of incline for the M1 was steadily moving higher, but nothing overly serious until COVID hit. And you can see the S&P 500 chart below to see how it has reacted since.
Let's go back 25 years and you can see how much more pronounced this COVID stimulus has been compared to the financial crisis, and even one of the worst bear markets that we have seen starting in 2000 when the dot com bubble burst. So, since about 2008, the stock market has been fed (no pun intended) a massive dose of liquidity that, at some point, will be the source of a major problem for our financial system. But of course people have been saying that for a long, long time, and here stocks are near their all time highs.
I won't pretend that I understand how it all of the ins and outs of this stuff works, but when you look at those charts above, it's pretty obvious that something is wrong, and we've gone off course for quite some time now. The question is, when will the piper be paid? I'm sure our children, and / or our grandchildren will find out some day, but could it be in our foreseeable future for some of us older folks? That would be a retirement killer, don't you think?
The S&P 500 (C-fund) was flat on Thursday as it bangs its head on the top of that long rising trading channel. Back in early December it banged that resistance line several times before finally pullback toward the bottom of the channel, but those declines are so minimal that it is frustrating the market timers. There has been a pattern of 3 or 4 days up, followed by either sideways or slightly downward action, but each time the bears thought they were making some headway, the bulls have been jumping right back in.
The DWCPF (small caps / S-fund) was down on Thursday but is still just off the all-time highs. This chart certainly can use a breather, but I have been saying that for some time now.
The Dow transportation Index was down sharply yesterday, falling 1.73% and giving up most of Wednesday's big gains. I'd say that's a warning sign, but it also looks like a bull flag is forming so watch the bottom of that blue flag below. If it holds, we could be on the cusp of another breakout. If we see 12,800 again or lower, than this may have a problem.
The EFA (I-fund) was up slightly Thursday and that was even with the help of a decline in the dollar so there's some possible underlying weakness here. It has been rising along the bottom of that old support line after breaking below it four trading days ago.
BND (bonds / F-fund) was down yesterday, yields up, and yesterday I talked about this looking at the large open gap above as a possible target, but I didn't mention that there is also a small gap open down near 87.20 that may be looking for some attention before that overhead gap gets visited.
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
Thanks for reading. Have a great weekend!
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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[TD="width: 362, align: center"]
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Yesterday we talked about valuations and how stimulus seems to be the market catalyst, rather than those stock price valuations, and history does suggest that economic stimulus is a driving force for the stocks market, but sometimes things can go too far and eventually we get a great awaking and a major decline in stocks to remind us of the consequences of going too far.
The victim of this stimulus tends to be the dollar, and a falling dollar does push prices higher - in many things, not just stock prices. Here's what has happened to the dollar since the Fed started to increase their balance sheets, and talks of government stimulus took over the market near those March stock market lows.
And here is that Fed Money Supply that it has been throwing at the market. This chart goes back to 2018 when the angle of incline for the M1 was steadily moving higher, but nothing overly serious until COVID hit. And you can see the S&P 500 chart below to see how it has reacted since.
Let's go back 25 years and you can see how much more pronounced this COVID stimulus has been compared to the financial crisis, and even one of the worst bear markets that we have seen starting in 2000 when the dot com bubble burst. So, since about 2008, the stock market has been fed (no pun intended) a massive dose of liquidity that, at some point, will be the source of a major problem for our financial system. But of course people have been saying that for a long, long time, and here stocks are near their all time highs.
I won't pretend that I understand how it all of the ins and outs of this stuff works, but when you look at those charts above, it's pretty obvious that something is wrong, and we've gone off course for quite some time now. The question is, when will the piper be paid? I'm sure our children, and / or our grandchildren will find out some day, but could it be in our foreseeable future for some of us older folks? That would be a retirement killer, don't you think?
The S&P 500 (C-fund) was flat on Thursday as it bangs its head on the top of that long rising trading channel. Back in early December it banged that resistance line several times before finally pullback toward the bottom of the channel, but those declines are so minimal that it is frustrating the market timers. There has been a pattern of 3 or 4 days up, followed by either sideways or slightly downward action, but each time the bears thought they were making some headway, the bulls have been jumping right back in.
The DWCPF (small caps / S-fund) was down on Thursday but is still just off the all-time highs. This chart certainly can use a breather, but I have been saying that for some time now.
The Dow transportation Index was down sharply yesterday, falling 1.73% and giving up most of Wednesday's big gains. I'd say that's a warning sign, but it also looks like a bull flag is forming so watch the bottom of that blue flag below. If it holds, we could be on the cusp of another breakout. If we see 12,800 again or lower, than this may have a problem.
The EFA (I-fund) was up slightly Thursday and that was even with the help of a decline in the dollar so there's some possible underlying weakness here. It has been rising along the bottom of that old support line after breaking below it four trading days ago.
BND (bonds / F-fund) was down yesterday, yields up, and yesterday I talked about this looking at the large open gap above as a possible target, but I didn't mention that there is also a small gap open down near 87.20 that may be looking for some attention before that overhead gap gets visited.
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
Thanks for reading. Have a great weekend!
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.
