Stocks were mixed again yesterday as the S&P 500 and Nasdaq ticked higher again, while the Dow and small caps lagged. The indices certainly have good reason to stall after November's rally, and that's typical in the first half of December, especially after the first few days. Yields were up as the 10-year is finding support after the recent pullback, so bonds and the F-fund were down on the day. The I-fund is finally showing some life.
With the rate cuts, the Atlanta Fed has their 4th quarter GDP growth estimate up to 3.2%. Meanwhile the Fed is still cutting rates, although perhaps not as aggressively as they had initially planned because of sticky inflation numbers, but it's tough to argue with the Fed and the economy's progress.
How that translates into more gains in the stock market remains to be seen. That data, along with economic optimism after the election, and we have to wonder how much has already been priced in?
I heard someone the other day mention "buy the election, sell the inauguration", and that sounds very interesting - sort of like buy the rumor, sell the news, but recent history has suggested that isn't the way to go, even if stocks take off after the election.
Take a look at the prior three post-Election Day rallies, and the year that follows.
2008 was a different situation as the Election was held during the financial crisis and the stock market did not bottom until March of 2009.
Not that past performance guarantees future results. The Trump economy will have to perform as advertised once he's back in the White House, and some expectations may end up bigger than results, so we'll see, and we'll see if investors have continued faith in the economy, company expectations, and the stock market. Stocks are not cheap now - valuation-wise, so "average" won't due. It has to be great.
The 10-year Treasury Yield seems to be getting a little support at the key moving averages. Seeing a pullback stabilize near these averages is normal, but it could be temporary. I am still seeing that 4.2% and 4.1% yield as the key levels, and perhaps the bottom of a range. The stock market may initially like to see the yield fall below that level, but the reason it would fall may not be appealing - such as a very weak jobs report this Friday.
Despite the 3.2% GDP expectations for the fourth quarter, we saw weakness in two other economically sensitive areas - the Transportation Index and oil.
The Transportation Index could be fine as it backs off from all time highs, but that "F" flag is concerning to me and 17,000 - 16,750 really needs to hold or it could be triggering a warning.
Oil has been in a range, and a range is good. It may sound counter intuitive but we may not want to see oil move much lower because a head and shoulder pattern breakdown could be a sign of economic weakness. On the other hand, and the glass half full version is that oil may be falling because of Trump's pro drilling policies which could lift supplies levels, which would bring down the price.
We'll get the November jobs report on Friday.
The S&P 500 (C-fund) continues to glide higher. The big gains of early November are done, but for now it has been climbing the wall of worry to new highs for three days in a row now. I would look for 6000 to hold as support, but for now that blue ascending channel could keep the bears frustrated.
DWCPF (small caps / S-fund) was down modestly again as the sideways consolidation continues. I don't see much wrong with this chart but sometimes when we get flat action like this, some bulls will give up and we'll see one quick push lower before it reverses back up. 2400 and 2370 area key support levels right now.
ACWX was up 0.40% yesterday and the I-fund chart is coming back to life. Is it time to start jumping on this bandwagon while US stocks slow down? Maybe, but you never know what that pesky dollar is going to do, and the added volatility would be something to deal with.
You can see the updated I-fund and other TSP share prices and returns posted by about 8:30 PM ET daily here: https://www.tsptalk.com/tsp_share_prices.php
BND (bonds / F-fund) rallied early on the weaker JOLTS data but when yields headed back up, this chart and the F-fund headed down giving back some of Monday's gains. Yesterday's low was the bottom of that old filled blue gap so it may try to hold as support.
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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We got the JOLTS jobs opening report yesterday and it showed openings continuing to dwindle. That sounds bad but this is just what the Federal Reserve wanted when they started raising interest rates a couple of years ago. They didn't want to kill the jobs market, but it had gotten a little hot and it was part of the inflation equation. So, we'd have to say again - along with avoiding a recession despite the rate hikes, and keeping inflation under control with those cuts, they've done a pretty decent job so far.
With the rate cuts, the Atlanta Fed has their 4th quarter GDP growth estimate up to 3.2%. Meanwhile the Fed is still cutting rates, although perhaps not as aggressively as they had initially planned because of sticky inflation numbers, but it's tough to argue with the Fed and the economy's progress.
How that translates into more gains in the stock market remains to be seen. That data, along with economic optimism after the election, and we have to wonder how much has already been priced in?
I heard someone the other day mention "buy the election, sell the inauguration", and that sounds very interesting - sort of like buy the rumor, sell the news, but recent history has suggested that isn't the way to go, even if stocks take off after the election.
Take a look at the prior three post-Election Day rallies, and the year that follows.
2008 was a different situation as the Election was held during the financial crisis and the stock market did not bottom until March of 2009.
Not that past performance guarantees future results. The Trump economy will have to perform as advertised once he's back in the White House, and some expectations may end up bigger than results, so we'll see, and we'll see if investors have continued faith in the economy, company expectations, and the stock market. Stocks are not cheap now - valuation-wise, so "average" won't due. It has to be great.
The 10-year Treasury Yield seems to be getting a little support at the key moving averages. Seeing a pullback stabilize near these averages is normal, but it could be temporary. I am still seeing that 4.2% and 4.1% yield as the key levels, and perhaps the bottom of a range. The stock market may initially like to see the yield fall below that level, but the reason it would fall may not be appealing - such as a very weak jobs report this Friday.
Despite the 3.2% GDP expectations for the fourth quarter, we saw weakness in two other economically sensitive areas - the Transportation Index and oil.
The Transportation Index could be fine as it backs off from all time highs, but that "F" flag is concerning to me and 17,000 - 16,750 really needs to hold or it could be triggering a warning.
Oil has been in a range, and a range is good. It may sound counter intuitive but we may not want to see oil move much lower because a head and shoulder pattern breakdown could be a sign of economic weakness. On the other hand, and the glass half full version is that oil may be falling because of Trump's pro drilling policies which could lift supplies levels, which would bring down the price.
We'll get the November jobs report on Friday.
The S&P 500 (C-fund) continues to glide higher. The big gains of early November are done, but for now it has been climbing the wall of worry to new highs for three days in a row now. I would look for 6000 to hold as support, but for now that blue ascending channel could keep the bears frustrated.
DWCPF (small caps / S-fund) was down modestly again as the sideways consolidation continues. I don't see much wrong with this chart but sometimes when we get flat action like this, some bulls will give up and we'll see one quick push lower before it reverses back up. 2400 and 2370 area key support levels right now.
ACWX was up 0.40% yesterday and the I-fund chart is coming back to life. Is it time to start jumping on this bandwagon while US stocks slow down? Maybe, but you never know what that pesky dollar is going to do, and the added volatility would be something to deal with.
You can see the updated I-fund and other TSP share prices and returns posted by about 8:30 PM ET daily here: https://www.tsptalk.com/tsp_share_prices.php
BND (bonds / F-fund) rallied early on the weaker JOLTS data but when yields headed back up, this chart and the F-fund headed down giving back some of Monday's gains. Yesterday's low was the bottom of that old filled blue gap so it may try to hold as support.
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.
