Not the best action on a day that is historically, on average, one of the best trading days of the year for stocks. The Dow actually did manage to hold onto a small gain, but the broader indices were knocked down with tech and growth stocks suffering under the pressure of the recent rally in bond yields. The rally in yields hurt the bond market / F-fund the most. The dollar was down slightly helping commodity price remain buoyant.
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The relentless pressure on tech stocks continued as money managers seem to be dumping those big 2022 losers like Tesla, Nvidia, Amazon, etc. to get them off their end of year reports. That, combined with the sharp rally in bond yields yesterday was too much for the growth stocks of the Nasdaq and small cap indices. So, despite more share volume being up than down on the NYSE, it was the selling in the Nasdaq that took down many of the indices as the declining volume was almost 3 to 1 over the advancing.
The 10-year Yield has been moving sharply higher since the mid-month lows and that large negative candlestick from back in November (CPI report) is being revisited, which is not unusual. But the chart is also coming up against some possible resistance that could turn this chart down, and perhaps tech stocks up. That could be wishful thinking, but watch that 3.9% area on this chart to see how it reacts.
Keeping things simple, because that's all I know, the reason for yields going up could be either stronger economic data, and / or inflationary concerns. The economy also has a say in the price of oil and look how similar the chart of oil and the 10-yer yield have been over the last few months, and how the S&P 500 is moving in the opposite direction. So, if stocks are going to rally, the top two charts may need to turn back down.
The DWCPF (S-fund) looked interesting enough to pull it up into this area of the commentary. I have made mention a few times this year how bear flags, which normally break down, have been breaking to the upside more often this year. Here it is again with a similar spike down followed by a consolidation. Normally this is a warning sign but notice that all of them move upward first, even if on for a few days. Here it is again.
As the end of the year approaches, the bullish seasonality advantage gets less effective, even though the Santa Claus rally officially goes through the first two trading days of the New Year. As I noted last week, there was no trading on the 24th this year, which has been a negative day for stocks over the last 30 years (on average) so perhaps that was what we had a taste of yesterday?
Chart provided courtesy of www.sentimentrader.com
Admin Note: Don't forget to login to the TSP Talk AutoTracker if you haven't for a while. Accounts that have been idle for too long won't rollover into the New Year. I'll remind everyone again during the week before New Year's but in case you won't be around, here is your reminder. If you are not already on the AutoTracker, this is a good time to start so that we track your full year in 2023. It's free. More info on creating a new account: AutoTracker - How to get started
The S&P 500 (C-fund) was down moderately, but on a day that had a swift seasonal breeze at its back means it was a disappointment for those still on hold for a meaning Santa Claus rally. We have a bear flag on the chart, but as I mentioned above in the DWCPF / S-fund chart, we've seen a lot of these break to the upside - even if it was a fake out that led to lower prices days or weeks later. That positive reversal tail last Thursday could turn out to be a low, but there are certainly a lot of pundits who would disagree. The bulls should be in charge this week, but so far they haven't really shown up. Maybe today?
The EFA / I-fund led the way again as the European markets were mostly higher yesterday, as was Japan. There's a bear flag here as well as the index hovers above its 200-day EMA. There's a small gap overhead, and two large gaps below.
BND (Bonds / F-fund) took one on the chin yesterday as yields spiked higher. It fell below its 50-day EMA and falling toward a rising support line. This looks suspect, but on the bright side, the higher yields go, the more the bond market is betting AGAINST a recession. Perhaps this is just a holiday reversal that will flip back up after the New Year?
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
To get weekly or daily notifications when we post new commentary, sign up HERE.
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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The relentless pressure on tech stocks continued as money managers seem to be dumping those big 2022 losers like Tesla, Nvidia, Amazon, etc. to get them off their end of year reports. That, combined with the sharp rally in bond yields yesterday was too much for the growth stocks of the Nasdaq and small cap indices. So, despite more share volume being up than down on the NYSE, it was the selling in the Nasdaq that took down many of the indices as the declining volume was almost 3 to 1 over the advancing.
The 10-year Yield has been moving sharply higher since the mid-month lows and that large negative candlestick from back in November (CPI report) is being revisited, which is not unusual. But the chart is also coming up against some possible resistance that could turn this chart down, and perhaps tech stocks up. That could be wishful thinking, but watch that 3.9% area on this chart to see how it reacts.
Keeping things simple, because that's all I know, the reason for yields going up could be either stronger economic data, and / or inflationary concerns. The economy also has a say in the price of oil and look how similar the chart of oil and the 10-yer yield have been over the last few months, and how the S&P 500 is moving in the opposite direction. So, if stocks are going to rally, the top two charts may need to turn back down.
The DWCPF (S-fund) looked interesting enough to pull it up into this area of the commentary. I have made mention a few times this year how bear flags, which normally break down, have been breaking to the upside more often this year. Here it is again with a similar spike down followed by a consolidation. Normally this is a warning sign but notice that all of them move upward first, even if on for a few days. Here it is again.
As the end of the year approaches, the bullish seasonality advantage gets less effective, even though the Santa Claus rally officially goes through the first two trading days of the New Year. As I noted last week, there was no trading on the 24th this year, which has been a negative day for stocks over the last 30 years (on average) so perhaps that was what we had a taste of yesterday?
Chart provided courtesy of www.sentimentrader.com
Admin Note: Don't forget to login to the TSP Talk AutoTracker if you haven't for a while. Accounts that have been idle for too long won't rollover into the New Year. I'll remind everyone again during the week before New Year's but in case you won't be around, here is your reminder. If you are not already on the AutoTracker, this is a good time to start so that we track your full year in 2023. It's free. More info on creating a new account: AutoTracker - How to get started
The S&P 500 (C-fund) was down moderately, but on a day that had a swift seasonal breeze at its back means it was a disappointment for those still on hold for a meaning Santa Claus rally. We have a bear flag on the chart, but as I mentioned above in the DWCPF / S-fund chart, we've seen a lot of these break to the upside - even if it was a fake out that led to lower prices days or weeks later. That positive reversal tail last Thursday could turn out to be a low, but there are certainly a lot of pundits who would disagree. The bulls should be in charge this week, but so far they haven't really shown up. Maybe today?
The EFA / I-fund led the way again as the European markets were mostly higher yesterday, as was Japan. There's a bear flag here as well as the index hovers above its 200-day EMA. There's a small gap overhead, and two large gaps below.
BND (Bonds / F-fund) took one on the chin yesterday as yields spiked higher. It fell below its 50-day EMA and falling toward a rising support line. This looks suspect, but on the bright side, the higher yields go, the more the bond market is betting AGAINST a recession. Perhaps this is just a holiday reversal that will flip back up after the New Year?
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
To get weekly or daily notifications when we post new commentary, sign up HERE.
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.
