Friday started out as a day of rest for stocks with yields rallying again, but the bulls put up a fight and pushed most of the indices back into positive territory by the close. The Dow gained 293-points and along with the Transportation Index, led on the upside, while the Nasdaq was down but it too closed well off its lows. Rising bond yields continue to put pressure on growth stocks and the question on everyone's minds is how high can these yields go?
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The bond market was hit hard as the yield on the 10-year Treasury rallied 7% to 1.64%. Somehow the small caps in our S-fund were able to dismiss this, but it was the strength in the value stocks that helped. You can see the new high in the yield here...
This chart shows that the Russell 2000 Growth Index is still lagging the Russell 2000 Value Index, which is at all time highs. Too bad our TSP doesn't give us more options for situations like these where sectors matter more than just picking between large cap and small caps.
This could be a good sign for the broader market but like I said, it would be nice if we could get more specific funds where we can direct our money into funds that may not be so heavily weighted in the lagging tech stocks - just as an example. Just like we would have been better off in a concentrated high tech fund for several years leading up to this recent pullback in tech.
Another example is the S&P 500 Equal Weighted Index, which has the same 500 stocks as the S&P 500 Index, but those large tech stocks are not being over weighted so, while our C-fund, which tracks the S&P 500 Index, is flirting with new highs, the Equal Weighted version already broke out meaningfully to new highs several days ago.
OK, I have a correction to report. I was looking at the March seasonality chart and seeing how strong this upcoming week was historically and I wondered how much that changed from the prior year before the COVID crash of March 2020 was included in this data, and to my surprise the 2020 chart looked exactly the same as this 2021 chart below that I had been posting. Surely the dramatic ups and downs last March would have changed this, right?
Chart provided courtesy of www.sentimentrader.com
So, I contacted sentimenTrader.com and asked how a month like March of 2020 did not change this chart for this year. Their answer was both a relief, and a disappointment. They said they found a bug in their software and these charts hadn't been updating. The relief was that I wasn't crazy for assuming it should have changed.
Bottom line, they fixed their bug and here is the new updated March seasonality chart, which goes back to 1985. It's quite a bit different with perhaps the biggest chance for this week being the average return on the 16th which went from about positive 0.22%, to a negative 0.18%. Other than that, all four days from the 15th to the 18th still have a strong percentage of time being positive of over 60%. That big spike on March 17 we see below was helped by a 6% rally in the S&P 500 last March 17th during the COVID chaos, however the 16th and 18th of March were dismal days for stocks last year.
Chart provided courtesy of www.sentimentrader.com
I'm glad I was able to clear that up, and I apologize that I had posted data that was incorrect.
Does that change our analysis going forward? As I've said before, other than surrounding some major holidays, seasonality isn't usually a primary indicator and generally only gives us gentle nudges for favoring one direction or the other. This week the nudge is positive.
After a year off, March Madness is back. If you're interested in joining our free bracket contest, please go here for more information: [url]https://www.tsptalk.com/mb/site-news-and-announcements/36406-march-madness-contest-2021-a.html
[/URL]
The S&P 500 (C-fund) has stalled here at the February highs, but that's not unusual, especially given the size of the move it took to get back to this area. It's a minor double top formation since the prior peak wasn't that long ago, so I wouldn't expect as much of a push back as we'd might see if this was a double top of a peak that happened 6 months or a year ago. The PMO indicator is getting ready to overtake its moving average , which is generally a good sign, but sometimes it creates a short-term overbought situation where the rally stalls a bit, as I indicated below.
The weekly chart shows the narrow rising channel is still intact (red) while the blue channel is still there as a possible downside correction target. The old longer-term resistance line continues to act as support since that breakout late last year.
The DWCPF (small caps / S-fund) is still lagging the large cap indices but it has been trying to make a come back recently. I don't see much of a reason for it not to try to retest those old highs, but if it doesn't, and it flips back down, that would be a big red flag. It already made a lower low so a lower high would create a new downtrend.
The EFA (I-fund) continues it's trek to the previous highs. The dollar rallied on Friday and the late rally in U.S. stocks on Friday may be why the I-fund didn't pay as much as the EFA suggests. It may play catch up today.
The Dow Transportation Index had another big day and it's current rally off the late January low is getting quite extended. It has only closed below that channel once since then, and that may make this due for some digesting of these recent gains.
The Volatility Index made a one month low on Friday and is in that area between 20 and 21, which has been mostly vacant for months. Friday was the first time it closed in between 20 and 21 since early December, although there was one close below 20 in February.
BND (bonds / F-fund) continues to feel the pressure of rising yields, so with the 10-year yields hitting a 13 month high, BND hit a one year low, and the F-fund is taking the brunt of that.
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. 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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[TR]
[TD="align: right"][/TD]
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[TD]
[/TD]
[TD="align: center"]
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The bond market was hit hard as the yield on the 10-year Treasury rallied 7% to 1.64%. Somehow the small caps in our S-fund were able to dismiss this, but it was the strength in the value stocks that helped. You can see the new high in the yield here...
This chart shows that the Russell 2000 Growth Index is still lagging the Russell 2000 Value Index, which is at all time highs. Too bad our TSP doesn't give us more options for situations like these where sectors matter more than just picking between large cap and small caps.
This could be a good sign for the broader market but like I said, it would be nice if we could get more specific funds where we can direct our money into funds that may not be so heavily weighted in the lagging tech stocks - just as an example. Just like we would have been better off in a concentrated high tech fund for several years leading up to this recent pullback in tech.
Another example is the S&P 500 Equal Weighted Index, which has the same 500 stocks as the S&P 500 Index, but those large tech stocks are not being over weighted so, while our C-fund, which tracks the S&P 500 Index, is flirting with new highs, the Equal Weighted version already broke out meaningfully to new highs several days ago.
OK, I have a correction to report. I was looking at the March seasonality chart and seeing how strong this upcoming week was historically and I wondered how much that changed from the prior year before the COVID crash of March 2020 was included in this data, and to my surprise the 2020 chart looked exactly the same as this 2021 chart below that I had been posting. Surely the dramatic ups and downs last March would have changed this, right?
Chart provided courtesy of www.sentimentrader.com
So, I contacted sentimenTrader.com and asked how a month like March of 2020 did not change this chart for this year. Their answer was both a relief, and a disappointment. They said they found a bug in their software and these charts hadn't been updating. The relief was that I wasn't crazy for assuming it should have changed.
Bottom line, they fixed their bug and here is the new updated March seasonality chart, which goes back to 1985. It's quite a bit different with perhaps the biggest chance for this week being the average return on the 16th which went from about positive 0.22%, to a negative 0.18%. Other than that, all four days from the 15th to the 18th still have a strong percentage of time being positive of over 60%. That big spike on March 17 we see below was helped by a 6% rally in the S&P 500 last March 17th during the COVID chaos, however the 16th and 18th of March were dismal days for stocks last year.
Chart provided courtesy of www.sentimentrader.com
I'm glad I was able to clear that up, and I apologize that I had posted data that was incorrect.
Does that change our analysis going forward? As I've said before, other than surrounding some major holidays, seasonality isn't usually a primary indicator and generally only gives us gentle nudges for favoring one direction or the other. This week the nudge is positive.
After a year off, March Madness is back. If you're interested in joining our free bracket contest, please go here for more information: [url]https://www.tsptalk.com/mb/site-news-and-announcements/36406-march-madness-contest-2021-a.html
[/URL]
The S&P 500 (C-fund) has stalled here at the February highs, but that's not unusual, especially given the size of the move it took to get back to this area. It's a minor double top formation since the prior peak wasn't that long ago, so I wouldn't expect as much of a push back as we'd might see if this was a double top of a peak that happened 6 months or a year ago. The PMO indicator is getting ready to overtake its moving average , which is generally a good sign, but sometimes it creates a short-term overbought situation where the rally stalls a bit, as I indicated below.
The weekly chart shows the narrow rising channel is still intact (red) while the blue channel is still there as a possible downside correction target. The old longer-term resistance line continues to act as support since that breakout late last year.
The DWCPF (small caps / S-fund) is still lagging the large cap indices but it has been trying to make a come back recently. I don't see much of a reason for it not to try to retest those old highs, but if it doesn't, and it flips back down, that would be a big red flag. It already made a lower low so a lower high would create a new downtrend.
The EFA (I-fund) continues it's trek to the previous highs. The dollar rallied on Friday and the late rally in U.S. stocks on Friday may be why the I-fund didn't pay as much as the EFA suggests. It may play catch up today.
The Dow Transportation Index had another big day and it's current rally off the late January low is getting quite extended. It has only closed below that channel once since then, and that may make this due for some digesting of these recent gains.
The Volatility Index made a one month low on Friday and is in that area between 20 and 21, which has been mostly vacant for months. Friday was the first time it closed in between 20 and 21 since early December, although there was one close below 20 in February.
BND (bonds / F-fund) continues to feel the pressure of rising yields, so with the 10-year yields hitting a 13 month high, BND hit a one year low, and the F-fund is taking the brunt of that.
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. 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.
