Another rally for stocks as we head into today's key CPI Report. The Dow added another 300+ points and small caps have been moving up so rapidly that I feel like we're watching a rubber band getting stretched to the point of fraying. We can't deny that the action has been bullish, but the question is whether it can last or not. The technicals in the charts have been solidly positive but indicators and many fundamentals have some market participants and money managers remaining stubbornly bearish, and I have been one of them.
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Despite the Fed's threats of more interest rate hikes, the market continues to roll along to the upside suggesting either they don't believe the Fed is going to continue to act, or they see a two hikes and done plan, and the bulls are front running that possibility.
That may be true, but there are no certainties as far as the Fed goes, until the Fed says so. The bulls may get some confirmation today with that CPI report this morning, if it shows inflation continuing to drift lower. Inflation is still high and above the Fed's target, but it has been heading in the right direction. A higher than expected report could spook the market that is pricing in nothing but sunshine and lollipops.
As I have been talking about lately, many investors, money managers, and Hedge Funds have been expecting trouble and have been underinvested, and that tends to bring on the phenomenon of chasing, and that means buying very small dips, if waiting for a dip at all at this point. I also mentioned that you can count me as part of that underinvested group. Only time will tell if I've been correct in being overly cautious, but from a trading perspective, I have been on the wrong side of the current market action.
You can either go with the trend, and that sometimes means going against the fundamentals and sticking strictly with the charts, or you can try to buy low and sell high, looking to pick tops and bottoms. But when momentum is strong on the way up, or down, you can be on the wrong side for a while. Right now it is the trend traders winning the battle.
When following a positive trend it could take a major loss off the highs before the trend actually breaks or changes, and that's the problem. Instead of locking in profits when stocks are up big, you watch a lot of those profits slip away before you get your trend following sell signal.
And of course the buy and holder is also benefiting from the relentless upside trend right now, but by definition they take the full force of the losses when the market is trending lower as they hold through thick and thin.
Speaking of trends, Apple is about to test the lower end of its long 2023 rising trading channel. In recent days it has had some negative relative strength as it has not been moving up with the broader market. This may be concerning if the "as goes Apple, so goes the market" approach sees a break in the trend here. The other option is that the broader, smaller stocks, are just taking their turn after lagging for so long.
We came into July after a very strong June and historical seasonal record was very bullish for the first half of the month. There were some hiccups in that first week but that was quickly erased. After this week however, the seasonality chart isn't quite as favorable to the bulls, at least until that final week in July, and the August chart is actually one of the most rocky seasonal months of the year.
Chart provided courtesy of www.sentimentrader.com
Many index charts look like they want to breakout to the upside, as the S-fund chart has already done, but a major economic report like the CPI in an inflationary period could also trigger a sell the news reaction, because a favorable report seems to have been priced in since the March lows, if now the October 2022 lows, so anything less than favorable could be trouble. And, a sell the news reaction doesn't always have to be bad news.
TSP Talk - 20 Years! - For those interested, I posted about TSP Talk being in its 20th year with our 20th anniversary coming up in January. This post is mostly about our forum members, specifically those who have been around since 2004, which I truly appreciate. I am so grateful to all of you who have supported us over the years. Thank you!
The S&P 500 (C-fund) had another solid gain yesterday and the market continues to climb that wall of worry, if there is anymore worry out there. The cup and handle formation looks good despite the overly stretched chart. The cup and handle on the S-fund broke out yesterday.
And here that breakout is as the DWCPF (S-fund) put together a 3rd big day after last Thursday's positive reversal. The previous peak back in February (not shown) was near 1845. has the laggard become the leader?
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.
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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[TD="width: 338, align: center"] Daily TSP Funds Return
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[/TR]
[/TABLE]
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[/TR]
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Despite the Fed's threats of more interest rate hikes, the market continues to roll along to the upside suggesting either they don't believe the Fed is going to continue to act, or they see a two hikes and done plan, and the bulls are front running that possibility.
That may be true, but there are no certainties as far as the Fed goes, until the Fed says so. The bulls may get some confirmation today with that CPI report this morning, if it shows inflation continuing to drift lower. Inflation is still high and above the Fed's target, but it has been heading in the right direction. A higher than expected report could spook the market that is pricing in nothing but sunshine and lollipops.
As I have been talking about lately, many investors, money managers, and Hedge Funds have been expecting trouble and have been underinvested, and that tends to bring on the phenomenon of chasing, and that means buying very small dips, if waiting for a dip at all at this point. I also mentioned that you can count me as part of that underinvested group. Only time will tell if I've been correct in being overly cautious, but from a trading perspective, I have been on the wrong side of the current market action.
You can either go with the trend, and that sometimes means going against the fundamentals and sticking strictly with the charts, or you can try to buy low and sell high, looking to pick tops and bottoms. But when momentum is strong on the way up, or down, you can be on the wrong side for a while. Right now it is the trend traders winning the battle.
When following a positive trend it could take a major loss off the highs before the trend actually breaks or changes, and that's the problem. Instead of locking in profits when stocks are up big, you watch a lot of those profits slip away before you get your trend following sell signal.
And of course the buy and holder is also benefiting from the relentless upside trend right now, but by definition they take the full force of the losses when the market is trending lower as they hold through thick and thin.
Speaking of trends, Apple is about to test the lower end of its long 2023 rising trading channel. In recent days it has had some negative relative strength as it has not been moving up with the broader market. This may be concerning if the "as goes Apple, so goes the market" approach sees a break in the trend here. The other option is that the broader, smaller stocks, are just taking their turn after lagging for so long.
We came into July after a very strong June and historical seasonal record was very bullish for the first half of the month. There were some hiccups in that first week but that was quickly erased. After this week however, the seasonality chart isn't quite as favorable to the bulls, at least until that final week in July, and the August chart is actually one of the most rocky seasonal months of the year.
Chart provided courtesy of www.sentimentrader.com
Many index charts look like they want to breakout to the upside, as the S-fund chart has already done, but a major economic report like the CPI in an inflationary period could also trigger a sell the news reaction, because a favorable report seems to have been priced in since the March lows, if now the October 2022 lows, so anything less than favorable could be trouble. And, a sell the news reaction doesn't always have to be bad news.
TSP Talk - 20 Years! - For those interested, I posted about TSP Talk being in its 20th year with our 20th anniversary coming up in January. This post is mostly about our forum members, specifically those who have been around since 2004, which I truly appreciate. I am so grateful to all of you who have supported us over the years. Thank you!
The S&P 500 (C-fund) had another solid gain yesterday and the market continues to climb that wall of worry, if there is anymore worry out there. The cup and handle formation looks good despite the overly stretched chart. The cup and handle on the S-fund broke out yesterday.
And here that breakout is as the DWCPF (S-fund) put together a 3rd big day after last Thursday's positive reversal. The previous peak back in February (not shown) was near 1845. has the laggard become the leader?
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.
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.
