Stocks were mostly flat on Tuesday with the Dow shedding 11-points. The S&P 500 was up slightly and the S-fund lagged as the regional banks took down the small cap indices again. Bonds were up slightly although yields were mixed. The battle between inflation and a potentially weakening economy is what the market and the Fed are facing two weeks before the next FOMC meeting and interest rate hike is scheduled.
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This was a popular headline yesterday in many business newsrooms. This one happens to come from CNBC:
Fed's James Bullard pushes for faster rate hikes, sees 'good shot' at beating inflation
St. Louis Fed President James Bullard told CNBC that a more aggressive interest rate hike now would give the FOMC a better chance to bring down inflation
That could be why we're seeing yields drifting higher again, although the 10-year yield did fall slightly yesterday. The 2-year went up so the 2/10 yield curve inversion widened again.
Despite evidence that inflation is waning, the Fed seems concerned about it enough to consider continuing with interest rate hikes. What will the stock market think of that? If yesterday was any indication, it didn't seem to care very much as it shrugged off that news.
Those regional bank stocks continue to be very heavy near the recent lows. It has spent more than a month in that tight range between 42 and about 44. The bulls have been resilient in the broader market, but the bears are keeping the pressure on here.
With so many of those small banks in the Russell 2000, this index has also had a difficult time getting out of the starting gate. It has been moving slightly off the recent lows, but unfortunately that creates bearish look flags.
The economically sensitive Dow Transportation Index popped its head up to a 6-week high yesterday morning, but it fell flat in later trading to create a negative reversal day. However, despite the loss, it closed above the descending resistance line for a second straight day. United Airlines reported earnings after the bell yesterday and was trading up 2% after hours, which could help the Transports today.
I haven't taken a look at the Tokyo market in a while, and with the Nikkei Index being a big part of the I-fund, which has been outperforming, I guess I shouldn't be surprised to see a very bullish looking cup and handle formation breaking out. If that can hold, the bulls may keep that I-fund rally going.
The dollar trending lower has been a good reason for this and the EFA's (I-fund) success. The dollar did have a little relief rally recently and it is testing its descending resistance. If that UUP chart somehow gets above that resistance, perhaps we will finally see some of those open gaps get filled on the EFA. Otherwise, it's hard to argue with this success.
There isn't a whole lot of economic data on the calendar for the rest of the week, but earnings should start coming in more heavily. Netflix reported last night and after an initial sell off, it bounced back to flat in after hours trading so it may not be much of an influence today.
The S&P 500 (C-fund) continues to drift higher in that F-flag, and if I sound like a broken record it is because F-flags can drift higher for a long time before they break. Unfortunately for the bulls, more often than not they eventually break down, but you've heard my rant about flags not working well over the last year or so. The trend is up but it is nearing the upper end of a one year trading range. The open gap near 3975 continues to have me looking over my shoulder every day.
DWCPF (S-fund) was down slightly yesterday but the mostly sideways move was enough to keep it above the descending resistance line and the 50-day EMA for a second straight day. The Russell 2000 small cap index isn't looking quite as good, but both will rely on some relief from those small bank stocks.
BND (Bonds / F-fund) was up as it got a bit of a relief bounce off of the 200-day EMA. Small overhead open gaps and a large open gap below will vie for attention.
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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This was a popular headline yesterday in many business newsrooms. This one happens to come from CNBC:
Fed's James Bullard pushes for faster rate hikes, sees 'good shot' at beating inflation
St. Louis Fed President James Bullard told CNBC that a more aggressive interest rate hike now would give the FOMC a better chance to bring down inflation
That could be why we're seeing yields drifting higher again, although the 10-year yield did fall slightly yesterday. The 2-year went up so the 2/10 yield curve inversion widened again.
Despite evidence that inflation is waning, the Fed seems concerned about it enough to consider continuing with interest rate hikes. What will the stock market think of that? If yesterday was any indication, it didn't seem to care very much as it shrugged off that news.
Those regional bank stocks continue to be very heavy near the recent lows. It has spent more than a month in that tight range between 42 and about 44. The bulls have been resilient in the broader market, but the bears are keeping the pressure on here.
With so many of those small banks in the Russell 2000, this index has also had a difficult time getting out of the starting gate. It has been moving slightly off the recent lows, but unfortunately that creates bearish look flags.
The economically sensitive Dow Transportation Index popped its head up to a 6-week high yesterday morning, but it fell flat in later trading to create a negative reversal day. However, despite the loss, it closed above the descending resistance line for a second straight day. United Airlines reported earnings after the bell yesterday and was trading up 2% after hours, which could help the Transports today.
I haven't taken a look at the Tokyo market in a while, and with the Nikkei Index being a big part of the I-fund, which has been outperforming, I guess I shouldn't be surprised to see a very bullish looking cup and handle formation breaking out. If that can hold, the bulls may keep that I-fund rally going.
The dollar trending lower has been a good reason for this and the EFA's (I-fund) success. The dollar did have a little relief rally recently and it is testing its descending resistance. If that UUP chart somehow gets above that resistance, perhaps we will finally see some of those open gaps get filled on the EFA. Otherwise, it's hard to argue with this success.
There isn't a whole lot of economic data on the calendar for the rest of the week, but earnings should start coming in more heavily. Netflix reported last night and after an initial sell off, it bounced back to flat in after hours trading so it may not be much of an influence today.
The S&P 500 (C-fund) continues to drift higher in that F-flag, and if I sound like a broken record it is because F-flags can drift higher for a long time before they break. Unfortunately for the bulls, more often than not they eventually break down, but you've heard my rant about flags not working well over the last year or so. The trend is up but it is nearing the upper end of a one year trading range. The open gap near 3975 continues to have me looking over my shoulder every day.
DWCPF (S-fund) was down slightly yesterday but the mostly sideways move was enough to keep it above the descending resistance line and the 50-day EMA for a second straight day. The Russell 2000 small cap index isn't looking quite as good, but both will rely on some relief from those small bank stocks.
BND (Bonds / F-fund) was up as it got a bit of a relief bounce off of the 200-day EMA. Small overhead open gaps and a large open gap below will vie for attention.
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.
