The jobs report was pretty strong on Friday except for one area, and investors pounced on it. Wage gains were much lower than expectations, so despite the 223,000 jobs created and the decline in the unemployment rate to 3.5%, the market rallied because they believe the Fed is most concerned with controlling wages to keep inflation from heating up again. The ISM report was weaker than expected and in a world where bad news is good news, the market applauded that as well and the Dow gained 701-points on the day, with a sea of green across the other indices.
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The weaker wage data sent yields and the dollar tumbling, which has been a catalyst for the stock market recently. From a technical standpoint both of these charts have nearly confirmed a new downtrend with another lower high. The high in the 10-year yield was made back in October after the dollar peaked in September. Both of those coincide with the low in the S&P 500 coming in early October.
The S&P 500 has been trading in a very tight range between 3800 - 3850, with a few failed breakouts and breakdowns during that time. It closed on Friday at 3895 and despite an intraday attempt, it did fail to close above that 3900 area which has been a key level of support and resistance for much of 2022.
I mentioned this HYG chart in December being concerned about the breakdown below a key support line after Christmas. But look what has happened since. Not only has it bounced back above the support line and the 50-day EMA, it's now back above its 200-day EMA and showing relative strength versus the S&P 500.
So, we're in a bear market and that means we should anticipate bearish results, but the charts and indicators are showing some potential bullishness, despite the bleak outlook that many of us have had coming into this year. Early this week could be a tell because if Friday's rally gets immediately turned on its head we'll know it was just another fake out. But if the charts can continue to build on some of the recent improvements, we may have the beginning of a shift occurring.
The key is the Fed and there are several scheduled speeches by various Fed members this week, including Chairman Jerome Powell on Tuesday. Ironically, they are all speaking this week before the release of the December CPI report on Thursday. Will they have that information already? Will they show signs of easing off their hawkish outlook or will they stay firm in their efforts to cut off inflation? That could make or break the market this week.
Admin note: We are offering a 25% off sale on annual subscriptions to TSP Talk Plus and RevShark's TSP Timing all this week. Whether you are new, or already subscriber, you can add another full year for 25% off the regular price. As I mentioned last week, Intrepid Timer's service will not be participating in the sale. The Last Look Report is already priced as low as we can go to keep it going, although it does have a 50% multi-service discount. More information
I showed the importance of 3900 in the chart above and Friday's "mini" breakout in the S&P 500 (C-fund) is a start, but not really confirming anything yet. We've had a few one day breakouts / breakdown above and below that 3800 - 3850 trading range so some upside follow through would be very important for the bulls early this week. 3900 could be a peak, otherwise I marked other potential upside targets with blue arrows.
The DWCPF (S-fund) rallied over 2% on the day, but just to remind us that it is never easy, the high on Friday was right at the 50-day EMA and the top of bearish flag that has been forming for weeks. Will the flag hold or can the bulls at least push it up to fill that gap first?
The 1.3% decline in the dollar helped the EFA / I-fund lead on the upside yet again. It is now a stone's throw away from testing the December CPI peak. The 50-day EMA is also very close to moving back above its 200-day EMA. The longer term chart below shows that the 69 area may be tough resistance, but that looks like a cup and handle formation, and / or an inverted head and shoulders pattern, both of which tend to eventually break to the upside.
BND (bonds / F-fund) is also had a big day on Friday with yields tanking on the weaker than expected wage data. The support of the 50-day EMA and the rising support line is about to test the resistance of the 200-day moving average (orange.) Can this break out to the upside and continue to leave that large gap open below 70?
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 so much 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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The weaker wage data sent yields and the dollar tumbling, which has been a catalyst for the stock market recently. From a technical standpoint both of these charts have nearly confirmed a new downtrend with another lower high. The high in the 10-year yield was made back in October after the dollar peaked in September. Both of those coincide with the low in the S&P 500 coming in early October.
The S&P 500 has been trading in a very tight range between 3800 - 3850, with a few failed breakouts and breakdowns during that time. It closed on Friday at 3895 and despite an intraday attempt, it did fail to close above that 3900 area which has been a key level of support and resistance for much of 2022.
I mentioned this HYG chart in December being concerned about the breakdown below a key support line after Christmas. But look what has happened since. Not only has it bounced back above the support line and the 50-day EMA, it's now back above its 200-day EMA and showing relative strength versus the S&P 500.
So, we're in a bear market and that means we should anticipate bearish results, but the charts and indicators are showing some potential bullishness, despite the bleak outlook that many of us have had coming into this year. Early this week could be a tell because if Friday's rally gets immediately turned on its head we'll know it was just another fake out. But if the charts can continue to build on some of the recent improvements, we may have the beginning of a shift occurring.
The key is the Fed and there are several scheduled speeches by various Fed members this week, including Chairman Jerome Powell on Tuesday. Ironically, they are all speaking this week before the release of the December CPI report on Thursday. Will they have that information already? Will they show signs of easing off their hawkish outlook or will they stay firm in their efforts to cut off inflation? That could make or break the market this week.
Admin note: We are offering a 25% off sale on annual subscriptions to TSP Talk Plus and RevShark's TSP Timing all this week. Whether you are new, or already subscriber, you can add another full year for 25% off the regular price. As I mentioned last week, Intrepid Timer's service will not be participating in the sale. The Last Look Report is already priced as low as we can go to keep it going, although it does have a 50% multi-service discount. More information
 | 25% Off Annual Premium Subscriptions!* Ends COB Friday... Click Here For More Information * For new or current subscribers |
I showed the importance of 3900 in the chart above and Friday's "mini" breakout in the S&P 500 (C-fund) is a start, but not really confirming anything yet. We've had a few one day breakouts / breakdown above and below that 3800 - 3850 trading range so some upside follow through would be very important for the bulls early this week. 3900 could be a peak, otherwise I marked other potential upside targets with blue arrows.
The DWCPF (S-fund) rallied over 2% on the day, but just to remind us that it is never easy, the high on Friday was right at the 50-day EMA and the top of bearish flag that has been forming for weeks. Will the flag hold or can the bulls at least push it up to fill that gap first?
The 1.3% decline in the dollar helped the EFA / I-fund lead on the upside yet again. It is now a stone's throw away from testing the December CPI peak. The 50-day EMA is also very close to moving back above its 200-day EMA. The longer term chart below shows that the 69 area may be tough resistance, but that looks like a cup and handle formation, and / or an inverted head and shoulders pattern, both of which tend to eventually break to the upside.
BND (bonds / F-fund) is also had a big day on Friday with yields tanking on the weaker than expected wage data. The support of the 50-day EMA and the rising support line is about to test the resistance of the 200-day moving average (orange.) Can this break out to the upside and continue to leave that large gap open below 70?
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 so much 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.
