The Dow lost 638-points yesterday with an avalanche of selling in the final couple of hours after the bulls nearly pulled the indices into positive territory just after lunch. Whether this was the bulls relenting after several failed attempts to move above overhead resistance, or a move to step aside before Fridays CPI report, does make a difference, because if it's the latter, the indices could snap back the CPI isn't as inflationary as expected, and expectations are low. Bonds were down as yields ticked higher.
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The White House made an announcement yesterday basically preparing us for a bad CPI report today, saying inflation remains high because of the continuing war in Ukraine. I didn't see if that report came out before or after the market close, but perhaps that is what triggered the late selling yesterday. The futures opened slightly higher at 6 PM ET on Thursday so I assume that announcement was priced in.
The action was really bad and it is either the start of the next leg lower, or the sell the rumor before possibly a buy the news after the CPI report. Fake out's are not uncommon as the large trading firms try to push smaller traders out of positions. I don't know if that is the case this time but we certainly have a setup for a buy the news reaction, if that's what they wanted.
TGIF for the bulls as the bears seem to be gaining momentum again. The CPI report this morning will either give the bears more wind at their backs or, if the report is less inflationary than expected, that wind could change directions. Not that the Fed is going to change their rate hike policy based on one report, but at least the market will know that it may have priced in the worst case scenario already.
I have been talking about all of the warnings signs that I had been seeing in the Transportation stocks, the HYG credit market chart, the price of oil moving over $121 a barrel, and a few others, but the bull flags on the S&P 500 and to a lesser degree the DWCPF S-fund index, had me holding on to some fleeting bullish hope that may have been dashed on Thursday barring some kind of reversal today.
Of course after the bell yesterday you couldn't throw a rock at the CNBC guests without hitting a bear, so the negative sentiment is alive and well, and sometimes that is a good sign.
This week's AAII Sentiment Investor Sentiment Survey (aaii.com) had only 21% say that they were bullish, and 47% were bearish, That's pretty extreme.
sentimentrader.com showed a post yesterday that "insiders" are not selling nearly as much as the average investor, which is a good sign. I don't know how aggressively they are buying, which would be interesting to know, but they don't seem as concerned with the current situation as the headlines might have us believe.
If the seasonality indicator is working, which is questionable, it would tell us that next week could be better than this week, but the following week - not so much. Today is the 10th.
Chart provided courtesy of www.sentimentrader.com
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The tsp.gov share prices used to get posted just after 7 PM ET each day but since the upgrade it has been pushed into the early hours of the following morning. So, unless something changes, our TSP Talk AutoTracker won't be updated until the morning after the close of business.
Here's the link to discussions regarding the new TSP.gov website: https://www.tsptalk.com/mb/tsp-talk-news-etc-/
The S&P 500 (C-fund) broke out a bull flag in the wrong direction. It happens, but not the most likely path. I can't say we didn't have some warning signs as I've talked about. The question now is whether this was a fake out in front of one of the more important CPI reports we've had in a while, or if a test of the lows is now on the agenda.
The DWCPF (S-fund) was up against serious resistance, but the bears weren't having any luck pushing it back - until Thursday. The big red bear flag was another warning sign, and it wasn't like we didn't know it was there.
The EFA (I-fund) broke down this week as we have seen a few times this year, and it looks like that bull market rally is over. Looking at it from a glass half full perspective, I suppose this could just be a short-term pullback in the rally off the lows. But it's a bear market and descending resistance held so the glass may be half empty.
BND (bonds / F-fund) was down again and is on its way to testing the recent lows. Bonds are risky but could get some attention if stocks do go down further as investors look for safer investments.
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 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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The White House made an announcement yesterday basically preparing us for a bad CPI report today, saying inflation remains high because of the continuing war in Ukraine. I didn't see if that report came out before or after the market close, but perhaps that is what triggered the late selling yesterday. The futures opened slightly higher at 6 PM ET on Thursday so I assume that announcement was priced in.
The action was really bad and it is either the start of the next leg lower, or the sell the rumor before possibly a buy the news after the CPI report. Fake out's are not uncommon as the large trading firms try to push smaller traders out of positions. I don't know if that is the case this time but we certainly have a setup for a buy the news reaction, if that's what they wanted.
TGIF for the bulls as the bears seem to be gaining momentum again. The CPI report this morning will either give the bears more wind at their backs or, if the report is less inflationary than expected, that wind could change directions. Not that the Fed is going to change their rate hike policy based on one report, but at least the market will know that it may have priced in the worst case scenario already.
I have been talking about all of the warnings signs that I had been seeing in the Transportation stocks, the HYG credit market chart, the price of oil moving over $121 a barrel, and a few others, but the bull flags on the S&P 500 and to a lesser degree the DWCPF S-fund index, had me holding on to some fleeting bullish hope that may have been dashed on Thursday barring some kind of reversal today.
Of course after the bell yesterday you couldn't throw a rock at the CNBC guests without hitting a bear, so the negative sentiment is alive and well, and sometimes that is a good sign.
This week's AAII Sentiment Investor Sentiment Survey (aaii.com) had only 21% say that they were bullish, and 47% were bearish, That's pretty extreme.
sentimentrader.com showed a post yesterday that "insiders" are not selling nearly as much as the average investor, which is a good sign. I don't know how aggressively they are buying, which would be interesting to know, but they don't seem as concerned with the current situation as the headlines might have us believe.
If the seasonality indicator is working, which is questionable, it would tell us that next week could be better than this week, but the following week - not so much. Today is the 10th.
Chart provided courtesy of www.sentimentrader.com
-----------
The tsp.gov share prices used to get posted just after 7 PM ET each day but since the upgrade it has been pushed into the early hours of the following morning. So, unless something changes, our TSP Talk AutoTracker won't be updated until the morning after the close of business.
Here's the link to discussions regarding the new TSP.gov website: https://www.tsptalk.com/mb/tsp-talk-news-etc-/
The S&P 500 (C-fund) broke out a bull flag in the wrong direction. It happens, but not the most likely path. I can't say we didn't have some warning signs as I've talked about. The question now is whether this was a fake out in front of one of the more important CPI reports we've had in a while, or if a test of the lows is now on the agenda.
The DWCPF (S-fund) was up against serious resistance, but the bears weren't having any luck pushing it back - until Thursday. The big red bear flag was another warning sign, and it wasn't like we didn't know it was there.
The EFA (I-fund) broke down this week as we have seen a few times this year, and it looks like that bull market rally is over. Looking at it from a glass half full perspective, I suppose this could just be a short-term pullback in the rally off the lows. But it's a bear market and descending resistance held so the glass may be half empty.
BND (bonds / F-fund) was down again and is on its way to testing the recent lows. Bonds are risky but could get some attention if stocks do go down further as investors look for safer investments.
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 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.
