Stocks were flat for most of the morning on Wednesday and up until the Fed's policy statement when the bulls got the Goldilocks policy statement and commentary that they were craving. The Dow jumped 401-points and it was a broad rally that included large and small cap stocks. Yields were down helping the F-fund to a gain.
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First things, first: I apologize, but I have some friends in from out of town for March Madness so I don't want to be rude and lock myself in my office for too long, so I am going to try to make this brief. It may be more of the same tomorrow if the market cooperates.
Speaking of March Madness, our annual March Madness Contest is getting started and the deadline to join is the tip-off the first game today. It's free and there's prizes if you want in! More info
OK, the Fed gave the market a nice Goldilocks scenario going forward and the stock market reacted as we might expect, although those who may have expected a "sell the news" reaction due to the rally in stocks leading up to this FOMC meeting, may have been surprised at the strength of the rally yesterday.
What made it Goldilocks-like? Jerome Powell said he is still on a mission to fight inflation and there's more work to do, but says it is heading in the right direction. He says the economy remains more firm than expected, and the strong labor market is not something he is concerned about regarding interest rates and, knowing all that, he anticipates the Fed cutting rates three times before the end of the year.
What's not to like? The only concern market-wise is whether stocks are pricing in too much dovish action, and if things have come too far too fast.
As I have been saying the S&P 500 has been extended, and is getting more extended, but support continues to hold and the economic and monetary policy news unfolding looks good for the market.
And when it come to the small caps, the bullish looking chart which had consolidated for two month, has played out in textbook fashion so far, although there's a little work to do to get past the early March negative reversal highs.
The 10-year Treasury Yield was down but not tremendously given the dovish news, but it was the shorter term yields that fell sharply so some yield curves steepened. As we have been talking about, the right shoulder of that inverted head and shoulders pattern is forming on the 10-year, so it will be interesting to see if this yield actually holds up within that shoulder rather than peaking and trending lower after the double top. The right shoulder would imply some chopping around in the near term, similar to the left shoulder.
Some follow up on that Dow Transportation Index chart shows that it was able to battle back above that 100-day EMA, which was very necessary in my mind, in order to keep the stock market rally in general moving forward. The 1.8% gain pushed it back above its 50-day EMA as well.
So that's it for today and, barring any major events tomorrow, Friday's report may be a quickie as well.
The EFA (I-fund) was up over 1% yesterday. The TSP hasn't posted their share prices as of this writing so it is possible that the I-fund won't get the 1% gain that the EFA suggests because of the late rally in the US, which occurred after the overseas markets had already closed, so sometimes they have to make adjustments the following day. So, if they don't give that gain, it will likely be adjusted in Thursday' prices.
As for the chart, the decline in the dollar helped quite a bit and the bullish pennant / bull-flag formation did its job and broke to the upside.
BND (Bonds / F-fund) rallied and recaptured its 50-day EMA but backed off before filling in the overhead open gap. As I mentioned above, the 10-year yield is still on the bullish side which may weigh in this chart if that persists.
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.
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First things, first: I apologize, but I have some friends in from out of town for March Madness so I don't want to be rude and lock myself in my office for too long, so I am going to try to make this brief. It may be more of the same tomorrow if the market cooperates.
Speaking of March Madness, our annual March Madness Contest is getting started and the deadline to join is the tip-off the first game today. It's free and there's prizes if you want in! More info
OK, the Fed gave the market a nice Goldilocks scenario going forward and the stock market reacted as we might expect, although those who may have expected a "sell the news" reaction due to the rally in stocks leading up to this FOMC meeting, may have been surprised at the strength of the rally yesterday.
What made it Goldilocks-like? Jerome Powell said he is still on a mission to fight inflation and there's more work to do, but says it is heading in the right direction. He says the economy remains more firm than expected, and the strong labor market is not something he is concerned about regarding interest rates and, knowing all that, he anticipates the Fed cutting rates three times before the end of the year.
What's not to like? The only concern market-wise is whether stocks are pricing in too much dovish action, and if things have come too far too fast.
As I have been saying the S&P 500 has been extended, and is getting more extended, but support continues to hold and the economic and monetary policy news unfolding looks good for the market.
And when it come to the small caps, the bullish looking chart which had consolidated for two month, has played out in textbook fashion so far, although there's a little work to do to get past the early March negative reversal highs.
The 10-year Treasury Yield was down but not tremendously given the dovish news, but it was the shorter term yields that fell sharply so some yield curves steepened. As we have been talking about, the right shoulder of that inverted head and shoulders pattern is forming on the 10-year, so it will be interesting to see if this yield actually holds up within that shoulder rather than peaking and trending lower after the double top. The right shoulder would imply some chopping around in the near term, similar to the left shoulder.
Some follow up on that Dow Transportation Index chart shows that it was able to battle back above that 100-day EMA, which was very necessary in my mind, in order to keep the stock market rally in general moving forward. The 1.8% gain pushed it back above its 50-day EMA as well.
So that's it for today and, barring any major events tomorrow, Friday's report may be a quickie as well.
The EFA (I-fund) was up over 1% yesterday. The TSP hasn't posted their share prices as of this writing so it is possible that the I-fund won't get the 1% gain that the EFA suggests because of the late rally in the US, which occurred after the overseas markets had already closed, so sometimes they have to make adjustments the following day. So, if they don't give that gain, it will likely be adjusted in Thursday' prices.
As for the chart, the decline in the dollar helped quite a bit and the bullish pennant / bull-flag formation did its job and broke to the upside.
BND (Bonds / F-fund) rallied and recaptured its 50-day EMA but backed off before filling in the overhead open gap. As I mentioned above, the 10-year yield is still on the bullish side which may weigh in this chart if that persists.
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.
