Stocks rallied as the economic data continues to come in just right in front of next month's Fed rate cuts, and the combination of stable data and lower rates is music to investors' ears. Better than expected retail sales and jobless claims data sent the indices higher at the open yesterday, opening gaps in most indices and creating gains of well over 1%, with 2% gains in the Nasdaq and small caps. Bonds (F-fund) were down as yields moved up on the strong economic data.
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Is anyone finding this easy? Remember a couple of weeks ago when the Mag 7 stocks were sending earnings warnings, the Yen carry trade was killing the market, Warren Buffett was selling a bunch of stock, and the jobs report was a dud? I guess it was all a ruse, or the bell rang that signaled that there was sufficient fear in the market for the pullback to be over.
Suddenly very weak jobs data has gotten solid again. The struggling consumer is sending retail sales up big. And of course inflation continues to become less of an issue. Moreover, we all know the Fed is going to cut interest rates next month by at least 0.25%. To help the rate cut story, the Atlanta Fed lowered their Q3 GDP estimate from 2.9% to 2.4% yesterday. That's a big drop but 2.4% growth is nothing to sneeze at.
The VIX (Volatility Index) shot up to 65 then fell over the next week at the fastest pace ever recorded. That's after never getting as high as 35 in the two years prior, and even going back through the entire 2022 bear market it only got as high as 39. What is going on this month, and what the heck does the market have in store for us next? A rug pull now that everyone is getting bullish again, or a continued move higher to leave the underinvested behind and try to get them to chase higher prices?
Want more paranoia? Notice anything weird about the last five closing prices of the S&P 500? Only 3's, 4's, and 5's? Any numerologists out there want to interpret that, or is this clear proof that there is a deep state running the stock market? :laugh:
The S&P 500 (C-fund) gapped up again, just as it was getting overbought and running into serious resistance. The PMO indicator has curled up and is about to move back above its moving average, which is good sign for the intermediate-term indication, but potentially a short-term overbought warning. Maybe we are in store for some sideways action like we saw in June, if the bears have no teeth left.
As many investors expected the rally to run out of steam, instead we got another gap up, and in recent years we have seen many more "gap and go" rallies than I remember ever happening before, so I am reluctant to say this gap has to get filled quickly - but I'm sure that's what they want up to think -- See how that works? :^)
Here's some of the recent gap and go rallies (green arrows) over the last year, with a few gaps fills (red) just before the "G&G".
That's not what I have come to believe is typical in my years of experience, but maybe we need to get used to it -- or is that what they want us to think? Double :^)
There was an exception in yesterday's action. The Dow Transportation Index did gap up and did have a 1% plus gain, blasting through heavy resistance n the process, but it created a negative kangaroo tail reversal candlestick after filling in its open gap from early August, and closing well off the highs, plus it tagged the May peak. Those reversals have created direction changes in prior instances.
Yields popped higher on the better than expected retail sales and the weekly jobless data. It's in a down trend, but there is an open gap up by 4.1% that could draw some short-term attention.
The Election Year seasonally calendar is finally acting like history suggested it could, although as we talked about before, with Biden out of the race we should probably be looking at the red chart and not the "sitting president" green chart. It still does well in August, but look out in September and October heading into Election Day. Of course the Fed is supposed to cut rates on September 18.
It is an option expiration Friday which means high volume trading but the action may be a little manipulated as large money managers jockey for position to help their expiring options and futures contracts by the close, so there are targets that have more meaning than others to these big money players.
Nobody likes getting their inboxes stuffed with useless email, including me, but there are a few that I use daily to remind me to check out each day. My link to sentmentrader.com's daily updates is one of the must reads for me, as is the link to the daily woot.com item (it used to be better before Amazon took it over.) We would hope that a daily or weekly reminder would be of interest to you, whether that is to check out our market commentaries, read the latest forum posts, view the updated TSP share prices and returns, check the TSP Talk AutoTracker standings and latest IFTs, or even take part in the weekly TSP Talk market sentiment survey. If so, please check out how to be added to one or more of our lists. You can unsubscribe or change your list preferences at any time. We don't spam you or sell information, or anything like that. We just want to keep you engaged with TSP Talk. Thanks!
The DWCPF (S-fund) had another crooked number gain as it finally filled its August 2nd open gap (blue), and retested the May peak. A gap and go? A red gap fill? This could be a sticky area, but it's still August and seasonality us on the bulls' side I suppose.
The EFA (I-fund) also gapped up and resistance does not seem to be a problem. Even a gap up in the dollar didn't hurt, although it did make the I-fund lag the US TSP stock funds.
BND (F-fund) pulled back sharply on the surprisingly strong economic data. It filled an open gap in the process (blue) while opening one above. It's above resistance but the lower high is possibly a concern for bonds. A bounce back before falling below 73.50 would be a bullish move.
Thanks so much for reading! Have a great weekend!
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.html
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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Is anyone finding this easy? Remember a couple of weeks ago when the Mag 7 stocks were sending earnings warnings, the Yen carry trade was killing the market, Warren Buffett was selling a bunch of stock, and the jobs report was a dud? I guess it was all a ruse, or the bell rang that signaled that there was sufficient fear in the market for the pullback to be over.
Suddenly very weak jobs data has gotten solid again. The struggling consumer is sending retail sales up big. And of course inflation continues to become less of an issue. Moreover, we all know the Fed is going to cut interest rates next month by at least 0.25%. To help the rate cut story, the Atlanta Fed lowered their Q3 GDP estimate from 2.9% to 2.4% yesterday. That's a big drop but 2.4% growth is nothing to sneeze at.
The VIX (Volatility Index) shot up to 65 then fell over the next week at the fastest pace ever recorded. That's after never getting as high as 35 in the two years prior, and even going back through the entire 2022 bear market it only got as high as 39. What is going on this month, and what the heck does the market have in store for us next? A rug pull now that everyone is getting bullish again, or a continued move higher to leave the underinvested behind and try to get them to chase higher prices?
Want more paranoia? Notice anything weird about the last five closing prices of the S&P 500? Only 3's, 4's, and 5's? Any numerologists out there want to interpret that, or is this clear proof that there is a deep state running the stock market? :laugh:
The S&P 500 (C-fund) gapped up again, just as it was getting overbought and running into serious resistance. The PMO indicator has curled up and is about to move back above its moving average, which is good sign for the intermediate-term indication, but potentially a short-term overbought warning. Maybe we are in store for some sideways action like we saw in June, if the bears have no teeth left.
As many investors expected the rally to run out of steam, instead we got another gap up, and in recent years we have seen many more "gap and go" rallies than I remember ever happening before, so I am reluctant to say this gap has to get filled quickly - but I'm sure that's what they want up to think -- See how that works? :^)
Here's some of the recent gap and go rallies (green arrows) over the last year, with a few gaps fills (red) just before the "G&G".
That's not what I have come to believe is typical in my years of experience, but maybe we need to get used to it -- or is that what they want us to think? Double :^)
There was an exception in yesterday's action. The Dow Transportation Index did gap up and did have a 1% plus gain, blasting through heavy resistance n the process, but it created a negative kangaroo tail reversal candlestick after filling in its open gap from early August, and closing well off the highs, plus it tagged the May peak. Those reversals have created direction changes in prior instances.
Yields popped higher on the better than expected retail sales and the weekly jobless data. It's in a down trend, but there is an open gap up by 4.1% that could draw some short-term attention.
The Election Year seasonally calendar is finally acting like history suggested it could, although as we talked about before, with Biden out of the race we should probably be looking at the red chart and not the "sitting president" green chart. It still does well in August, but look out in September and October heading into Election Day. Of course the Fed is supposed to cut rates on September 18.
It is an option expiration Friday which means high volume trading but the action may be a little manipulated as large money managers jockey for position to help their expiring options and futures contracts by the close, so there are targets that have more meaning than others to these big money players.
Nobody likes getting their inboxes stuffed with useless email, including me, but there are a few that I use daily to remind me to check out each day. My link to sentmentrader.com's daily updates is one of the must reads for me, as is the link to the daily woot.com item (it used to be better before Amazon took it over.) We would hope that a daily or weekly reminder would be of interest to you, whether that is to check out our market commentaries, read the latest forum posts, view the updated TSP share prices and returns, check the TSP Talk AutoTracker standings and latest IFTs, or even take part in the weekly TSP Talk market sentiment survey. If so, please check out how to be added to one or more of our lists. You can unsubscribe or change your list preferences at any time. We don't spam you or sell information, or anything like that. We just want to keep you engaged with TSP Talk. Thanks!
The DWCPF (S-fund) had another crooked number gain as it finally filled its August 2nd open gap (blue), and retested the May peak. A gap and go? A red gap fill? This could be a sticky area, but it's still August and seasonality us on the bulls' side I suppose.
The EFA (I-fund) also gapped up and resistance does not seem to be a problem. Even a gap up in the dollar didn't hurt, although it did make the I-fund lag the US TSP stock funds.
BND (F-fund) pulled back sharply on the surprisingly strong economic data. It filled an open gap in the process (blue) while opening one above. It's above resistance but the lower high is possibly a concern for bonds. A bounce back before falling below 73.50 would be a bullish move.
Thanks so much for reading! Have a great weekend!
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.html
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.
