We came into the holiday shortened week with one certainty: This week has very bearish record going back 30 years, but that's rearview mirror data. So what happened? Stocks futures were up overnight, the indices opened higher, but the bears showed up and the S&P 500 spent most of the afternoon in negative territory, until the final minutes of trading when we got an odd spike higher. It was a new closing high for the S&P 500. Yields were down and the dollar was up.
Was that the plan, yesterday - to lock in a new highs? Does this one day chart look natural or was it a forced new high to try to get a reaction from us, "the dumb money?" What should we make of this one day chart where all of the gains came in the final few minutes of the trading day?
The new highs will be the headlines and perhaps get mom and pop interested in another wave of buying, but the only other headline near that time of day was, "Bill Ackman raises bid for Howard Hughes, says he will turn it into ‘modern-day Berkshire’", on CNBC. Not exactly market moving, right?
It's a tough market to analyze so I may be grasping at straws here looking for some clues, but I see that the Bank of America Fund Manager Survey Cash Balance fell below below 4.0% to 3.5%. That's a 15 year low. So why does that matter? Historically readings below 4% have been indication of an impending peak before a pullback.
Source and more info: https://x.com/SethCL/status/1891827087004082512
It's tough to see, but other low readings below 4% led to spikes in cash levels in the coming weeks, and that happens when these fund managers start selling. It's not a fool-proof indicator but this has a pretty good record of letting us know that things may be getting overly stretched.
Why are low cash levels potential trouble? They bought already. If a $10 billion fund had $5% billion in cash (50%), they have a lot of ammunition to do some buying. With less than 4% cash, they don't have a lot of options.
Perhaps the problem with that theory, based on technical analysis, is that while both the S&P 500 and the Nasdaq 100 made new highs yesterday, they have both been consolidating for a couple of months, so this is a natural and healthy move to new highs. Is it possibly that these indices have gone nowhere while money managers were buying to the point of having little cash left?
After last week's wild ride in yields, the 10-year Treasury Yield move right back up recapturing Friday's sizable decline. Again, they aren't making it easy on us to figure out a direction for stocks and bonds in the short term. This looks like a possible successful test of the 50-day EMA, but it also has the look of a bear flag, which generally lead to a move lower. So which way will yields go? What's the Fed doing with this information?
The Fed watches the 2-year Treasury Yield very closely, and they tend to push the Fed Funds Rate towards it. So what is the 2-year yield telling us? It's basically where it was 3+ months ago so all of the volatility in the news with tariffs, new policies, a tick up in inflation, [fill in the blank] since Election Day, and here we are with yields about where they started.
I'm really torn about the direction of the next big move. We have plenty of reasons to believe the bull market is alive and well as we hit new highs yesterday while the US Treasury General Account starts a $842 billion liquidity injection into the system, which is basically a new round of quantitative easing.
On the other hand some indices are at the top of a range while we have money managers holding historically low amounts of cash.
Something is going to have to give.
The S&P 500 (C-fund) made a new intraday (and closing) high yesterday by barely nudging across the Friday's high and the January 24th high. This is certainly not a definitive move and could still become a double top or triple top, and this would be the week for that to happen, given the seasonality calendar. However, triple tops are less likely. But something is building up after this 2.5 month long consolidation. A breakout wouldn't be a surprise, but neither would a pullback, so I am still sitting on bull / bear fence in the short-term.
DWCPF (S-fund) is up against resistance but it is also at the top of what looks like a possible bull flag. I'd say this looks more bullish than bearish but keep an eye on the 10-year Treasury Yield. It has to behave and not get too high for the S-fund to thrive over the large caps.
ACWX (the I-fund tracking index) keeps on keeping on, as it stretched closer to the late September highs after an impressive rally off the January 13 low. It's at the top of that rising channel but it is ascending quickly so it may not act as much resistance.
BND (F-fund) has been whipsawing above and below that top of that large descending trading channel.. On Friday it broke back above it, but yesterday it found its way back into the channel. Again, we're not seeing anything too definitive to help us out. Just more trading ranges and attempted breakouts that are not sticking.
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.
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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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Was that the plan, yesterday - to lock in a new highs? Does this one day chart look natural or was it a forced new high to try to get a reaction from us, "the dumb money?" What should we make of this one day chart where all of the gains came in the final few minutes of the trading day?
The new highs will be the headlines and perhaps get mom and pop interested in another wave of buying, but the only other headline near that time of day was, "Bill Ackman raises bid for Howard Hughes, says he will turn it into ‘modern-day Berkshire’", on CNBC. Not exactly market moving, right?
It's a tough market to analyze so I may be grasping at straws here looking for some clues, but I see that the Bank of America Fund Manager Survey Cash Balance fell below below 4.0% to 3.5%. That's a 15 year low. So why does that matter? Historically readings below 4% have been indication of an impending peak before a pullback.
Source and more info: https://x.com/SethCL/status/1891827087004082512
It's tough to see, but other low readings below 4% led to spikes in cash levels in the coming weeks, and that happens when these fund managers start selling. It's not a fool-proof indicator but this has a pretty good record of letting us know that things may be getting overly stretched.
Why are low cash levels potential trouble? They bought already. If a $10 billion fund had $5% billion in cash (50%), they have a lot of ammunition to do some buying. With less than 4% cash, they don't have a lot of options.
Perhaps the problem with that theory, based on technical analysis, is that while both the S&P 500 and the Nasdaq 100 made new highs yesterday, they have both been consolidating for a couple of months, so this is a natural and healthy move to new highs. Is it possibly that these indices have gone nowhere while money managers were buying to the point of having little cash left?
After last week's wild ride in yields, the 10-year Treasury Yield move right back up recapturing Friday's sizable decline. Again, they aren't making it easy on us to figure out a direction for stocks and bonds in the short term. This looks like a possible successful test of the 50-day EMA, but it also has the look of a bear flag, which generally lead to a move lower. So which way will yields go? What's the Fed doing with this information?
The Fed watches the 2-year Treasury Yield very closely, and they tend to push the Fed Funds Rate towards it. So what is the 2-year yield telling us? It's basically where it was 3+ months ago so all of the volatility in the news with tariffs, new policies, a tick up in inflation, [fill in the blank] since Election Day, and here we are with yields about where they started.
I'm really torn about the direction of the next big move. We have plenty of reasons to believe the bull market is alive and well as we hit new highs yesterday while the US Treasury General Account starts a $842 billion liquidity injection into the system, which is basically a new round of quantitative easing.
On the other hand some indices are at the top of a range while we have money managers holding historically low amounts of cash.
Something is going to have to give.
The S&P 500 (C-fund) made a new intraday (and closing) high yesterday by barely nudging across the Friday's high and the January 24th high. This is certainly not a definitive move and could still become a double top or triple top, and this would be the week for that to happen, given the seasonality calendar. However, triple tops are less likely. But something is building up after this 2.5 month long consolidation. A breakout wouldn't be a surprise, but neither would a pullback, so I am still sitting on bull / bear fence in the short-term.
DWCPF (S-fund) is up against resistance but it is also at the top of what looks like a possible bull flag. I'd say this looks more bullish than bearish but keep an eye on the 10-year Treasury Yield. It has to behave and not get too high for the S-fund to thrive over the large caps.
ACWX (the I-fund tracking index) keeps on keeping on, as it stretched closer to the late September highs after an impressive rally off the January 13 low. It's at the top of that rising channel but it is ascending quickly so it may not act as much resistance.
BND (F-fund) has been whipsawing above and below that top of that large descending trading channel.. On Friday it broke back above it, but yesterday it found its way back into the channel. Again, we're not seeing anything too definitive to help us out. Just more trading ranges and attempted breakouts that are not sticking.
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 use additional methods and strategies to determine fund positions.
