Stocks closed slightly higher on Friday but off their highs after some late selling before the long weekend. The I-fund held onto a big gain and of course that may be because the overseas markets closed much earlier in the day. The Dow gained 65-points while the S&P 500 and Nasdaq just barely held onto their gains. Bonds rallied as yields fell again, which has been confusing during this recent economic growth spurt.
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May was a mixed month for stocks with the C-fund (S&P 500) posting a slight gain of+0.69%, the S-fund slipping 0.66%, and the I-fund gained an impressive 3.6% with the help of a freefall in the dollar last month. Some weakness in Japan, Germany, and France yesterday may have helped push the U.S. index futures lower as they are down moderately as I write this on Monday.
The bond market isn't acting like the economy is growing at a rapid pace, but by many measures it is. I guess I need to keep in mind that the yield on the 10-year had fallen all the way down to 0.40% during the COVID crash, and as we see below it got at as high as about 1.75% back in March. That's quite a move, and since then it has been basing for the last two months, but is that a big bear flag?
The reason I follow this so closely is not because of the F-fund - remember bond prices and the F-fund move counter to yields - but because the bond market is actually a lot larger than the stock market - believe it or not - and bond traders and investors tend to be more savvy than the average stock investor. So when yields start coming down, that is generally an indication that the economy isn't growing all that much. There's a lot more to it than that - I'm not one of those savvy bond people, but in general, something seems amiss, so I pay attention. As long as it holds above the 50-day EMA it should be OK, but it closed below it three times last week and it ended week week just below it.
The dollar is another key since everything is priced in dollars and when the dollar falls, it takes more dollars to buy things that are purchased in dollars. When the dollar gains value, it takes fewer dollars to buy something. When the dollar gets too weak, and it certainly has a bearish looking chart after creating that large head and shoulders pattern, we have to be concerned that prices are getting too high and that's when inflation becomes a reality and perhaps a problem.
The chart actually moved up last week and broke above some long descending resistance on Friday. Was that a pre-holiday reversal or a real bottom being made? We could see a dead cat bounce as nothing goes down forever.
But in the meantime, take a look at the futures price of these items: Corn, Soybeans, Oil (WTIC), and Lumber. We've seen a few dip recently but all of them have come a long way since a year ago.
The price of gasoline tends to go up during the warmer months when people are driving more, but whether it's the dollar falling, gouging because of the stimulus money everyone is getting, new energy policies, whatever, at some point this is going to start hurting consumers, if it hasn't already. Add it onto the cost of all the other commodity rising prices, and this inflation, which some are not calling inflation, and may put the breaks on the economy's current growth spurt.
Admin note: While prepping for our new premium feature, the Last Look Report, and diving into our payment processing code, I decided it was time to finally clean things up and get rid of the annoying .95 or .99 cents on some of our subscription prices and round up a penny to get whole dollars. So you may be seeing the price of a monthly subscription to RevShark for example, which has been $19.95 for 15 years, is going to $20 even. TSP Talk Plus will go up a penny from $17.99 to $18. I hope this isn't a problem for any of you.
As for The Last Look Report, we're planning on implementing it next Monday with free access through that week, with a possible sneak peek later this week to a few forum members for some feedback. The info will come in a daily email from TommyIV about 30 minutes before the IFT deadline to help us make any last minute allocation decisions. It will also be posted in the premium area once the free trial is over. I'm sure it will evolve after we get started. The cost will be $10 a month, or $5 for those already subscribed to another service. Here's some info and a sample of what subscribers may get each morning. The Last Look Report Info. We worked on the backend stuff all weekend and we've already made a few changes from what you see there. I hope you like it. Thanks.
The S&P 500 (C-fund) was up slightly on Friday as the move off the most recent successful test of the 50-day EMA continued. I marked a few interesting points on the chart. First are the two open gaps, which generally don't remain open for very long on the S&P 500 index. Also, the PMO indicator has flattened out and is ticking higher. Typically when PMO indicator moves above its moving average for the first time, like it did in mid-March, there can be an overbought dip before it resumes the upside.
The weekly chart shows how often the index tests its 50 week moving average (purple), but it has now been almost a year since it has done so. Instead we've been seeing just minor dips (green.) As for the 200-week average, it has only been tested 3 times since 2012 so that's not something to anticipate until the 50-day EMA has been tested first.
The DWCPF (S-fund) has had a nice run off the early May low and will deal with some resistance to start the new month. We have a possible head and shoulders pattern here with the right shoulder potentially peaking, although the left shoulder did peak near 2230 so there could be more room on the upside if it can get past resistance.
The Russell 2000 chart is in a similar situation and may give us clues for the S-fund first.
The Dow Transportation Index broke down earlier in May from its rising channel, but so far it has been able to hold up and form a basing pattern rather the pull back - perhaps similar to those prior consolidation periods in blue.
The EFA / I-fund was up solidly on Friday but the dollar didn't hold near its highs and that formed a negative reversal day candlestick. Prior negative reversals on this chart led to some short term weakness. This chart has been testing its 50-day EMA about every few weeks so that could be the next target.
BND (bonds / F-fund) fell out of a narrow trading channel on Thursday and Friday of last week as it seems to be backing off from the 200-day EMA again. It's above the 50-day EMA so perhaps this bounce has more legs, but it looks like this is all happening within what could be a giant bear flag.
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
To get weekly or daily notifications when we post new commentary, sign up HERE.
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: center"] Daily TSP Funds Return
[TR]
[TD="align: right"][/TD]
[/TR]
[/TABLE]
[/TD]
[TD]
[/TD]
[TD="width: 362, align: center"]
[/TR]
[/TABLE]
May was a mixed month for stocks with the C-fund (S&P 500) posting a slight gain of+0.69%, the S-fund slipping 0.66%, and the I-fund gained an impressive 3.6% with the help of a freefall in the dollar last month. Some weakness in Japan, Germany, and France yesterday may have helped push the U.S. index futures lower as they are down moderately as I write this on Monday.
The bond market isn't acting like the economy is growing at a rapid pace, but by many measures it is. I guess I need to keep in mind that the yield on the 10-year had fallen all the way down to 0.40% during the COVID crash, and as we see below it got at as high as about 1.75% back in March. That's quite a move, and since then it has been basing for the last two months, but is that a big bear flag?
The reason I follow this so closely is not because of the F-fund - remember bond prices and the F-fund move counter to yields - but because the bond market is actually a lot larger than the stock market - believe it or not - and bond traders and investors tend to be more savvy than the average stock investor. So when yields start coming down, that is generally an indication that the economy isn't growing all that much. There's a lot more to it than that - I'm not one of those savvy bond people, but in general, something seems amiss, so I pay attention. As long as it holds above the 50-day EMA it should be OK, but it closed below it three times last week and it ended week week just below it.
The dollar is another key since everything is priced in dollars and when the dollar falls, it takes more dollars to buy things that are purchased in dollars. When the dollar gains value, it takes fewer dollars to buy something. When the dollar gets too weak, and it certainly has a bearish looking chart after creating that large head and shoulders pattern, we have to be concerned that prices are getting too high and that's when inflation becomes a reality and perhaps a problem.
The chart actually moved up last week and broke above some long descending resistance on Friday. Was that a pre-holiday reversal or a real bottom being made? We could see a dead cat bounce as nothing goes down forever.
But in the meantime, take a look at the futures price of these items: Corn, Soybeans, Oil (WTIC), and Lumber. We've seen a few dip recently but all of them have come a long way since a year ago.
The price of gasoline tends to go up during the warmer months when people are driving more, but whether it's the dollar falling, gouging because of the stimulus money everyone is getting, new energy policies, whatever, at some point this is going to start hurting consumers, if it hasn't already. Add it onto the cost of all the other commodity rising prices, and this inflation, which some are not calling inflation, and may put the breaks on the economy's current growth spurt.
Admin note: While prepping for our new premium feature, the Last Look Report, and diving into our payment processing code, I decided it was time to finally clean things up and get rid of the annoying .95 or .99 cents on some of our subscription prices and round up a penny to get whole dollars. So you may be seeing the price of a monthly subscription to RevShark for example, which has been $19.95 for 15 years, is going to $20 even. TSP Talk Plus will go up a penny from $17.99 to $18. I hope this isn't a problem for any of you.
As for The Last Look Report, we're planning on implementing it next Monday with free access through that week, with a possible sneak peek later this week to a few forum members for some feedback. The info will come in a daily email from TommyIV about 30 minutes before the IFT deadline to help us make any last minute allocation decisions. It will also be posted in the premium area once the free trial is over. I'm sure it will evolve after we get started. The cost will be $10 a month, or $5 for those already subscribed to another service. Here's some info and a sample of what subscribers may get each morning. The Last Look Report Info. We worked on the backend stuff all weekend and we've already made a few changes from what you see there. I hope you like it. Thanks.
The S&P 500 (C-fund) was up slightly on Friday as the move off the most recent successful test of the 50-day EMA continued. I marked a few interesting points on the chart. First are the two open gaps, which generally don't remain open for very long on the S&P 500 index. Also, the PMO indicator has flattened out and is ticking higher. Typically when PMO indicator moves above its moving average for the first time, like it did in mid-March, there can be an overbought dip before it resumes the upside.
The weekly chart shows how often the index tests its 50 week moving average (purple), but it has now been almost a year since it has done so. Instead we've been seeing just minor dips (green.) As for the 200-week average, it has only been tested 3 times since 2012 so that's not something to anticipate until the 50-day EMA has been tested first.
The DWCPF (S-fund) has had a nice run off the early May low and will deal with some resistance to start the new month. We have a possible head and shoulders pattern here with the right shoulder potentially peaking, although the left shoulder did peak near 2230 so there could be more room on the upside if it can get past resistance.
The Russell 2000 chart is in a similar situation and may give us clues for the S-fund first.
The Dow Transportation Index broke down earlier in May from its rising channel, but so far it has been able to hold up and form a basing pattern rather the pull back - perhaps similar to those prior consolidation periods in blue.
The EFA / I-fund was up solidly on Friday but the dollar didn't hold near its highs and that formed a negative reversal day candlestick. Prior negative reversals on this chart led to some short term weakness. This chart has been testing its 50-day EMA about every few weeks so that could be the next target.
BND (bonds / F-fund) fell out of a narrow trading channel on Thursday and Friday of last week as it seems to be backing off from the 200-day EMA again. It's above the 50-day EMA so perhaps this bounce has more legs, but it looks like this is all happening within what could be a giant bear flag.
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
To get weekly or daily notifications when we post new commentary, sign up HERE.
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.
