The bulls attempted a Turnaround Tuesday as the indices bottomed at 11:30 AM ET yesterday, rallied into the late afternoon, but just before getting back to even, there was another round of selling pushing the S&P 500 down about a half of a percent for the day. The Dow actually gained 160-points, but once again it was the Nasdaq and the small caps that lagged as economic growth comes in question. I'm surmising this based on the new the downtrend in bond yields.
Emotions were getting high as the positive open yesterday quickly failed again. But we can see here the low was made at 11:30 and the push toward breakeven before that late round of selling. Typically on a reversal day, the selling gets to panic levels (normally more so in a bear market) before they reverse back up, and because yesterday's reversal started so early, the rebound did run out of steam rather than getting one of those FOMO rallies into the close. But we're not in a bear market right now so we may not see anything that dramatic.
Investors are suddenly worried about valuations, the economy, and the uncertainty of the new policies being put in place. This may just be an adjustment in prices as the stocks taking the biggest beating are the one with excessive price to earnings ratios.
Technically, the S&P 500 chart is showing some cracks again, but it hasn't broken yet. I won't even talk about that possible bullish inverted head and shoulders pattern since it's rather vague, but right now, as of Tuesday's close, support is still holding. Is it different this time? Maybe it will be, but it isn't yet. The open gap, with the bottom between 5900 and 5845 may or may look to get filled while investors await tonight earnings from Nvidia.
The S&P closed above (see top chart) the orange major moving average again after being tested yesterday. The longer-term chart shows how long this average has been holding. It failed during that odd August sell off last year, but other than that it has been a decent area to do some buying. Is it different this time? Maybe it will be, but it isn't yet.
The CNN Fear & Index moved into the Extreme Fear Zone for the first time in a while, and while at 23 it is not at its lowest levels, extreme fear tends to mean there is some "sell first, ask questions late" activity going on. If we were in a bear market I'd expect this to touch single digits, but I think that this may be getting low enough for a bull market.
With Treasury Yields falling and the 2-year yield at 4.09% right now, the chances of another interest rate cut by the July FOMC meeting is up to 80%, and it's 90% to see one by the September meeting. This basically tells us that inflation is moving off the radar again. But the economy is coming into question.
The S&P 500 (C-fund) chart was addressed above but this chart shows a little more detail. The red rectangles are other times when the S&P 500 pulled back for 2 to 5 days. Yesterday was day #4 in the current pullback.
DWCPF (S-fund) closed off its lows for the second straight day but the bulls were not able to stop the bleeding yet. The 200-day EMA was tested yesterday after the recently reliable 130-day average failed the other day. This kind of looks like a bull flag but it is so big that the short-term wiggles could take it any number of places in the short term.
ACWX (the I-fund tracking index) rallied yesterday to keep its relative strength lead over the US funds. The trend remains up here and perhaps the 4-day dip was all it needed to resume its rally?
BND (F-fund) also continues to move higher although it is up against some resistance and above the ascending trading channel at the moment.
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
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Emotions were getting high as the positive open yesterday quickly failed again. But we can see here the low was made at 11:30 and the push toward breakeven before that late round of selling. Typically on a reversal day, the selling gets to panic levels (normally more so in a bear market) before they reverse back up, and because yesterday's reversal started so early, the rebound did run out of steam rather than getting one of those FOMO rallies into the close. But we're not in a bear market right now so we may not see anything that dramatic.
Investors are suddenly worried about valuations, the economy, and the uncertainty of the new policies being put in place. This may just be an adjustment in prices as the stocks taking the biggest beating are the one with excessive price to earnings ratios.
Technically, the S&P 500 chart is showing some cracks again, but it hasn't broken yet. I won't even talk about that possible bullish inverted head and shoulders pattern since it's rather vague, but right now, as of Tuesday's close, support is still holding. Is it different this time? Maybe it will be, but it isn't yet. The open gap, with the bottom between 5900 and 5845 may or may look to get filled while investors await tonight earnings from Nvidia.
The S&P closed above (see top chart) the orange major moving average again after being tested yesterday. The longer-term chart shows how long this average has been holding. It failed during that odd August sell off last year, but other than that it has been a decent area to do some buying. Is it different this time? Maybe it will be, but it isn't yet.
The CNN Fear & Index moved into the Extreme Fear Zone for the first time in a while, and while at 23 it is not at its lowest levels, extreme fear tends to mean there is some "sell first, ask questions late" activity going on. If we were in a bear market I'd expect this to touch single digits, but I think that this may be getting low enough for a bull market.
With Treasury Yields falling and the 2-year yield at 4.09% right now, the chances of another interest rate cut by the July FOMC meeting is up to 80%, and it's 90% to see one by the September meeting. This basically tells us that inflation is moving off the radar again. But the economy is coming into question.
The S&P 500 (C-fund) chart was addressed above but this chart shows a little more detail. The red rectangles are other times when the S&P 500 pulled back for 2 to 5 days. Yesterday was day #4 in the current pullback.
DWCPF (S-fund) closed off its lows for the second straight day but the bulls were not able to stop the bleeding yet. The 200-day EMA was tested yesterday after the recently reliable 130-day average failed the other day. This kind of looks like a bull flag but it is so big that the short-term wiggles could take it any number of places in the short term.
ACWX (the I-fund tracking index) rallied yesterday to keep its relative strength lead over the US funds. The trend remains up here and perhaps the 4-day dip was all it needed to resume its rally?
BND (F-fund) also continues to move higher although it is up against some resistance and above the ascending trading channel at the moment.
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
Questions, comments, or issues with today's commentary? We can discuss it in the Forum.
Daily Market Commentary Archives
For more info our other premium services, please go here... www.tsptalk.com/premiums.php
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 may use additional methods and strategies to determine fund positions.
