It's the post holiday week and we are seeing some post holiday reversals in some charts like the 10-year yield, the dollar, and the I-fund, but otherwise it has been more of the same, and Fed Chair Jerome Powell speaking with the Senate Banking Committee did little to change that. Large tech led yesterday, but the big three stock indices were mostly flat with the weakness coming in the usual suspects - small caps, the I-fund, and the Transports, which isn't the best situation, but it's working for the C-fund holders.
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[TD="width: 311, align: center"] Daily TSP Funds Return
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These charts of the three TSP funds tell us what has been going on for the last three years. While the C-fund has long distanced itself from the late 2021 highs after the breakout in January of this year, the S-fund is still looking up at those old highs. The red arrows show the action from the start of this year, and so far there's been no sign of those small caps trying to catch up. They've actually lost a lot more ground to the C-fund.
The I-fund has at least made new highs this year after its breakout above the 2021 highs in March of this year.
The big question everyone wants to know is when the rotation starts into the broader, smaller companies, and it seems like the more people expect it to happen, including myself, the less likely it will. Markets tend to turn once everyone gives up on it, and I actually heard someone yesterday on CNBC say that yesterday about rotation, that "it is still a long way away."
One person saying won't change things but once that sentiment of, "there's not going to be a rotation" takes hold, that will probably be when the it will start.
Those small regional banks that populate the Russell 2000 Index and the DWCPF, which is our S-fund, has been one of the burdens. The KRE is the regional bank ETF and you can see that it is down for the year. What will turn these around? I don't know, but larger banks have been coming to life lately, and they start to report earnings this week.
The stock market is still focused on those Magnificent 7 stocks and it has been Nvidia running the show, although Tesla is back in the picture after a nearly 50% run higher in the last month alone, but the Nvidia chart has a possible hiccup coming if the action from 4 months ago repeats itself. There was a nasty negative reversal in early March followed by a battle back to retrace that loss. Once it did that it put in a double top and experience a more serious correction. Well, we saw a similar negative reversal in June and it is in the process of retracing those losses now, so what happens at the double top?
You can see what the S&P 500 did when Nvidia corrected back then, so if you're expecting a pullback in the S&P 500, you may need to wait until Nvidia tries to test its recent highs.
Fed chair Jerome Powell will give testimony to the House Financial Services Committee today. We will also get the June CPI report tomorrow. We have some strong bullish seasonality coming up through the end of the week.
The S&P 500 (C-fund) made another new high. Wash, rinse repeat. Momentum is on the bulls' side but maybe it needs a little dirt before the next wash? It's been up 9 of the last 10 days.
The EFA (I-fund) and the dollar have each reversed course since the holiday making one of the holiday reversals that actually worked.
BND (bonds / F-fund) has been moving sideways since the pre-holiday peak, and that actually makes a bull flag. There are some gaps to fill below, but if the bull flag wants to play out... Perhaps the CPI report will shake things up tomorrow?
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.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.
[TABLE="align: center"]
[TR]
[TD="align: center"]
[TD]
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[TD="width: 311, align: center"] Daily TSP Funds Return
[TR]
[TD="align: right"][/TD]
[/TR]
[/TABLE]
[/TD]
[/TR]
[/TABLE]
These charts of the three TSP funds tell us what has been going on for the last three years. While the C-fund has long distanced itself from the late 2021 highs after the breakout in January of this year, the S-fund is still looking up at those old highs. The red arrows show the action from the start of this year, and so far there's been no sign of those small caps trying to catch up. They've actually lost a lot more ground to the C-fund.
The I-fund has at least made new highs this year after its breakout above the 2021 highs in March of this year.
The big question everyone wants to know is when the rotation starts into the broader, smaller companies, and it seems like the more people expect it to happen, including myself, the less likely it will. Markets tend to turn once everyone gives up on it, and I actually heard someone yesterday on CNBC say that yesterday about rotation, that "it is still a long way away."
One person saying won't change things but once that sentiment of, "there's not going to be a rotation" takes hold, that will probably be when the it will start.
Those small regional banks that populate the Russell 2000 Index and the DWCPF, which is our S-fund, has been one of the burdens. The KRE is the regional bank ETF and you can see that it is down for the year. What will turn these around? I don't know, but larger banks have been coming to life lately, and they start to report earnings this week.
The stock market is still focused on those Magnificent 7 stocks and it has been Nvidia running the show, although Tesla is back in the picture after a nearly 50% run higher in the last month alone, but the Nvidia chart has a possible hiccup coming if the action from 4 months ago repeats itself. There was a nasty negative reversal in early March followed by a battle back to retrace that loss. Once it did that it put in a double top and experience a more serious correction. Well, we saw a similar negative reversal in June and it is in the process of retracing those losses now, so what happens at the double top?
You can see what the S&P 500 did when Nvidia corrected back then, so if you're expecting a pullback in the S&P 500, you may need to wait until Nvidia tries to test its recent highs.
Fed chair Jerome Powell will give testimony to the House Financial Services Committee today. We will also get the June CPI report tomorrow. We have some strong bullish seasonality coming up through the end of the week.
The S&P 500 (C-fund) made another new high. Wash, rinse repeat. Momentum is on the bulls' side but maybe it needs a little dirt before the next wash? It's been up 9 of the last 10 days.
The EFA (I-fund) and the dollar have each reversed course since the holiday making one of the holiday reversals that actually worked.
BND (bonds / F-fund) has been moving sideways since the pre-holiday peak, and that actually makes a bull flag. There are some gaps to fill below, but if the bull flag wants to play out... Perhaps the CPI report will shake things up tomorrow?
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.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.
