After the new year started with a week of pullbacks, the stock market resumed its rally mode to start week two. The futures were not indicating anything better than a flat open, but as soon as that opening bell rang, the dip buyers jumped in with both feet. The Dow started the day deep in the red (down 200+ points) thanks to a steep decline in Boeing's stock, but it too caught the bullish bug, although it did lag quite a bit. Small caps also started slowly but the S-fund came back to gain near 2% on the day. The S&P and Nasdaq also had big days. Even bonds were in on the fun as yields fell and the F-fund ETF (BND) gained 0.44%.
[TABLE="align: center"]
[TR]
[TD="align: center"]
[/TD]
[TD]
[/TD]
[TD="width: 338, align: center"] Daily TSP Funds Return
[TABLE="align: center"]
[TR]
[TD="align: right"][/TD]
[/TR]
[/TABLE]
[/TD]
[/TR]
[/TABLE]
I don't know if it's related, but if you read yesterday's market commentary I was wondering why yields would have gone up after the jobs report. Yes, there were more jobs created than expected in December, but the negative revisions reported for the October and November reports made it a net loss compared to expectations. So yesterday's decline in yields made some sense, and of course the stock market has been triggering off yields, and the lower they go recently, the better for stocks.
The 10-year yield was down as I said, but it is still in limbo between the broken resistance line (dashed red) and the 200-day EMA and another resistance line coming off the October peak. That 4.1% area seems to be a line that could make or break the perception of economic growth and whether a recession is or isn't a possibility, the Fed's need to cut rates or not, and of course investor's confidence in whether yields are going to continue lower or bounce back toward 5% which was like kryptonite for the stock market late last summer. After the bell yesterday one of the more hawkish Fed governor's capitulated on the need for additional interest rate hikes, and that's good news for those looking for rate cuts this year -- the Fed as a whole just got a little more dovish.
The dollar was down yesterday but for the fourth day in a row it closed well off its intraday lows, so something is keeping it buoyant, although it is again struggling to get above the 50-day EMA. However, there could be a bull flag forming which may want to try to break to the upside. A weaker dollar helps keeps prices up, especially in the I-fund.
China is not a part of our I-fund but as a major global player I do like to keep an eye on it when it's doing something out of the ordinary. After rallying in late December, the Shanghai Composite started the new year with more losses and closed at a new low yesterday. This could be another reason to suspect lower bond yields as their economic weakness may be contagious.
On the other hand Japan, which is in our I fund, has a great looking chart that looks ready to make a big breakout move higher. That is what we call a cup formation, or if we break it down more, it is a bullish inverted head and shoulders pattern. They do tend to break to the upside, although there's no guarantees, but it looks ready to test those highs yet again. Japan makes up a good portion of our I-fund so any move here is meaningful to that TSP fund.
Checking on the price of oil, which can be a good barometer for the strength of the economy, shows another pullback toward the recent lows after failing at the 50-day EMA in December. This is good news for gas prices and while it's a bad sign for the economy, the extra cash that lower gas prices can put in consumers' pockets can be a boost to the economy.
This week's economic data highlights will be the CPI report on Thursday, and the PPI reports on Friday, so we have a few days before these potentially shake things up.
Admin note: We are celebrating our 20th anniversary this month and we're offering a discount on our annual subscriptions this week to new and current subscribers. You can sign up to a new service or add a year or two (in some cases) to your current subscription for 20% off the regular price (or 50% in some cases.) Thanks!
Use this link for more information: TSP Talk - Annual Subscription Sale
The S&P 500 (C-fund) opened flat but buyers stepped up right away and took the index higher all day, making it look like a trending day, which is a powerful indicator. It could just be a temporary bounce to retest the breakdown area, but the action was solid, although trading volume wasn't all that high so I don't know how much institutional buying was involved.
DWCPF (S-fund) led the way yesterday and you can see where it peaked out, right at the top of that open gap, so we'll have to just wait and see it there's more on the bone for the bulls. There is another small open gap up by 1960 that could be a target as well if this 1930 area, and the top of that blue gap, don't hold as resistance.
EFA (I-fund) rallied just over 1% yesterday so it lagged on the day but I'm sure those in the I-fund aren't complaining. The dollar (UUP), which was down on the day, is staying stubbornly close to that 50-day EMA. A breakout to the upside in UUP would put some pressure on the I-fund, but if UUP wants to back off and fill that open gap below 27.20, the I-fund could catch up to yesterday's gains in the US stock funds.
BND (bonds / F-fund) also rallied, which may have been the trigger for the stock market's rally. I'm a little worried about the lack of support below on this chart if there's some kind of economic news that sends yields higher, but otherwise the action in the chart looks good.
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.
[TABLE="align: center"]
[TR]
[TD="align: center"]
[TD]
[/TD]
[TD="width: 338, align: center"] Daily TSP Funds Return
[TR]
[TD="align: right"][/TD]
[/TR]
[/TABLE]
[/TD]
[/TR]
[/TABLE]
I don't know if it's related, but if you read yesterday's market commentary I was wondering why yields would have gone up after the jobs report. Yes, there were more jobs created than expected in December, but the negative revisions reported for the October and November reports made it a net loss compared to expectations. So yesterday's decline in yields made some sense, and of course the stock market has been triggering off yields, and the lower they go recently, the better for stocks.
The 10-year yield was down as I said, but it is still in limbo between the broken resistance line (dashed red) and the 200-day EMA and another resistance line coming off the October peak. That 4.1% area seems to be a line that could make or break the perception of economic growth and whether a recession is or isn't a possibility, the Fed's need to cut rates or not, and of course investor's confidence in whether yields are going to continue lower or bounce back toward 5% which was like kryptonite for the stock market late last summer. After the bell yesterday one of the more hawkish Fed governor's capitulated on the need for additional interest rate hikes, and that's good news for those looking for rate cuts this year -- the Fed as a whole just got a little more dovish.
The dollar was down yesterday but for the fourth day in a row it closed well off its intraday lows, so something is keeping it buoyant, although it is again struggling to get above the 50-day EMA. However, there could be a bull flag forming which may want to try to break to the upside. A weaker dollar helps keeps prices up, especially in the I-fund.
China is not a part of our I-fund but as a major global player I do like to keep an eye on it when it's doing something out of the ordinary. After rallying in late December, the Shanghai Composite started the new year with more losses and closed at a new low yesterday. This could be another reason to suspect lower bond yields as their economic weakness may be contagious.
On the other hand Japan, which is in our I fund, has a great looking chart that looks ready to make a big breakout move higher. That is what we call a cup formation, or if we break it down more, it is a bullish inverted head and shoulders pattern. They do tend to break to the upside, although there's no guarantees, but it looks ready to test those highs yet again. Japan makes up a good portion of our I-fund so any move here is meaningful to that TSP fund.
Checking on the price of oil, which can be a good barometer for the strength of the economy, shows another pullback toward the recent lows after failing at the 50-day EMA in December. This is good news for gas prices and while it's a bad sign for the economy, the extra cash that lower gas prices can put in consumers' pockets can be a boost to the economy.
This week's economic data highlights will be the CPI report on Thursday, and the PPI reports on Friday, so we have a few days before these potentially shake things up.
Admin note: We are celebrating our 20th anniversary this month and we're offering a discount on our annual subscriptions this week to new and current subscribers. You can sign up to a new service or add a year or two (in some cases) to your current subscription for 20% off the regular price (or 50% in some cases.) Thanks!
Use this link for more information: TSP Talk - Annual Subscription Sale
The S&P 500 (C-fund) opened flat but buyers stepped up right away and took the index higher all day, making it look like a trending day, which is a powerful indicator. It could just be a temporary bounce to retest the breakdown area, but the action was solid, although trading volume wasn't all that high so I don't know how much institutional buying was involved.
DWCPF (S-fund) led the way yesterday and you can see where it peaked out, right at the top of that open gap, so we'll have to just wait and see it there's more on the bone for the bulls. There is another small open gap up by 1960 that could be a target as well if this 1930 area, and the top of that blue gap, don't hold as resistance.
EFA (I-fund) rallied just over 1% yesterday so it lagged on the day but I'm sure those in the I-fund aren't complaining. The dollar (UUP), which was down on the day, is staying stubbornly close to that 50-day EMA. A breakout to the upside in UUP would put some pressure on the I-fund, but if UUP wants to back off and fill that open gap below 27.20, the I-fund could catch up to yesterday's gains in the US stock funds.
BND (bonds / F-fund) also rallied, which may have been the trigger for the stock market's rally. I'm a little worried about the lack of support below on this chart if there's some kind of economic news that sends yields higher, but otherwise the action in the chart looks good.
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.
