After Monday's positive reversal day, stocks opened higher on Tuesday and closed mostly higher, but it was quite a choppy day, and tech stocks did not fully participate. A cool PPI report helped trigger the rally, but we'll get the CPI inflation report before Wednesday's opening bell, and this could be a major pivot point for stocks. Small caps led yesterday as the PPI helped pull yields down slightly, pausing that freight train.
You can see the latest updated TSP share prices and returns, usually posted daily by 8:30 PM ET here: https://www.tsptalk.com/tsp_share_prices.php
Yesterday the wholesale side of the pricing gave the market a sigh of relief as the PPI, Producer Prices Index, came in slightly better than expected. After last month's very strong jobs report, the concern for higher inflation increased, and created the fear that the Fed is unlikely to cut rates again anytime soon.
The PPI increased 0.2% month-over-month in December, up 3.3% year-over-year versus 3.0% in November.
Core PPI (CPI Excluding food and energy), unchanged month-over-month, up 3.5% year-over-year versus 3.5% in November.
Today we get a more important indication of inflation with the CPI (Consumer Price Index). Expectations are looking for a 0.3% increase in the index for December, and a 0.2% increase in the Core CPI, which would be a tick lower than the prior month. Also in the prior month the year over year increase was 2.7% in the CPI, and +3.3% in the Core CPI.
Any deviations from these estimates is liable to be a big market mover as investors have become sensitive to the fact that interest rates not only may stop coming down, but as the bond market has been suggesting, they could potentially get moved up. The 10-year Yield did move lower yesterday on the PPI data, and while it was hardy a sign of a peak, the indecisive candlestick can be a sign of a reversal coming.
The dollar did come down on the PPI data and that was a meaningful move, but the trend is still up, and that continues to weigh on the I-fund.
ACWX (the I-fund tracking index) was up 0.60% yesterday and the I-fund was given a gain of 0.58%. The gain is nothing to write home about given the losses it needs to make up. The trend is still decisively down, but perhaps due for some short-term relief, however it needs help from the dollar.
The inflation concern is all around us, and while there are no blaring alarms going off like in 2021 and 2022, yields moving higher has been a red flag, but also take a look at these economically sensitive commodities.
Copper and Oil, both of which were forming bearish head and shoulder patterns in a down trending chart, have suddenly reversed upward. What was a concern about slowing economic growth at the end of last year, has now turned into either a bet on growth, or higher inflation -- or both, in early 2025.
Once again we look at some market leaders: The Russell 2000 small caps have rebounded nicely off of Monday's lows and the 200-day EMA after it broke down from its bear flag last week. But it is running into the old broken support line of that flag making today's reaction to the CPI that much more interesting. It could tell us that the downside is done, or that it's just beginning after retesting the flag.
The Dow Transportation Index had a second big day in a row. This looks like more than a dead cat bounce, but technically it is still in the bear flag. Closing above the 200-day EMA again is an improvement, and that's 5 of the last 6 days, but even if it can move higher from here, the 50-day EMA isn't too much further above the current levels. Good action. More resistance.
Like Friday's unexpectedly explosive jobs report, this CPI data will basically be President Biden's final inflation report, if that's any hint as to what may be coming.
Admin note: We are offering a discount on our annual subscriptions to new and current subscribers until Jan 18. You can sign up to a new service or add a year or two (in some cases) to your current subscription for 20% off the regular price (or 50% in some cases.) Use this link for more information: TSP Talk - Annual Subscription Sale
The S&P 500 (C-fund) was up slightly after giving up some larger morning gains, but also rallying back from moderate early afternoon losses. It's above some key levels and below a couple of others. The small caps chart has more definitive set ups, and this one is in some limbo between 5800 and 6000. The winner of that tug-o-war will likely dictate the direction for the next several months, but that's a wide range and we could stay in it awhile if the bears can't break this below 5800 soon. Trading volume is still quite light so there's no conviction yet from the larger money managers.
DWCPF (S-fund) had a big day gaining over 1% on Tuesday, following up on Monday's positive reversal. I see that the 20-day EMA just crossed below the 50-day EMA. That often triggers a counter rally, which is exactly what we've seen the last two days, but they are also often temporary rallies. 2300 is key resistance, but unlike the Russell 2000 (IWM) chart up above, it did make its way back into the bear flag.
BND (bonds / F-fund) had a small bounce but basically it stopped going down rather than going up. Obviously the CPI report will impact bond yields so we can only speculate whether inflation is coming or going.
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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You can see the latest updated TSP share prices and returns, usually posted daily by 8:30 PM ET here: https://www.tsptalk.com/tsp_share_prices.php
Yesterday the wholesale side of the pricing gave the market a sigh of relief as the PPI, Producer Prices Index, came in slightly better than expected. After last month's very strong jobs report, the concern for higher inflation increased, and created the fear that the Fed is unlikely to cut rates again anytime soon.
The PPI increased 0.2% month-over-month in December, up 3.3% year-over-year versus 3.0% in November.
Core PPI (CPI Excluding food and energy), unchanged month-over-month, up 3.5% year-over-year versus 3.5% in November.
Today we get a more important indication of inflation with the CPI (Consumer Price Index). Expectations are looking for a 0.3% increase in the index for December, and a 0.2% increase in the Core CPI, which would be a tick lower than the prior month. Also in the prior month the year over year increase was 2.7% in the CPI, and +3.3% in the Core CPI.
Any deviations from these estimates is liable to be a big market mover as investors have become sensitive to the fact that interest rates not only may stop coming down, but as the bond market has been suggesting, they could potentially get moved up. The 10-year Yield did move lower yesterday on the PPI data, and while it was hardy a sign of a peak, the indecisive candlestick can be a sign of a reversal coming.
The dollar did come down on the PPI data and that was a meaningful move, but the trend is still up, and that continues to weigh on the I-fund.
ACWX (the I-fund tracking index) was up 0.60% yesterday and the I-fund was given a gain of 0.58%. The gain is nothing to write home about given the losses it needs to make up. The trend is still decisively down, but perhaps due for some short-term relief, however it needs help from the dollar.
The inflation concern is all around us, and while there are no blaring alarms going off like in 2021 and 2022, yields moving higher has been a red flag, but also take a look at these economically sensitive commodities.
Copper and Oil, both of which were forming bearish head and shoulder patterns in a down trending chart, have suddenly reversed upward. What was a concern about slowing economic growth at the end of last year, has now turned into either a bet on growth, or higher inflation -- or both, in early 2025.
Once again we look at some market leaders: The Russell 2000 small caps have rebounded nicely off of Monday's lows and the 200-day EMA after it broke down from its bear flag last week. But it is running into the old broken support line of that flag making today's reaction to the CPI that much more interesting. It could tell us that the downside is done, or that it's just beginning after retesting the flag.
The Dow Transportation Index had a second big day in a row. This looks like more than a dead cat bounce, but technically it is still in the bear flag. Closing above the 200-day EMA again is an improvement, and that's 5 of the last 6 days, but even if it can move higher from here, the 50-day EMA isn't too much further above the current levels. Good action. More resistance.
Like Friday's unexpectedly explosive jobs report, this CPI data will basically be President Biden's final inflation report, if that's any hint as to what may be coming.
Admin note: We are offering a discount on our annual subscriptions to new and current subscribers until Jan 18. You can sign up to a new service or add a year or two (in some cases) to your current subscription for 20% off the regular price (or 50% in some cases.) Use this link for more information: TSP Talk - Annual Subscription Sale
The S&P 500 (C-fund) was up slightly after giving up some larger morning gains, but also rallying back from moderate early afternoon losses. It's above some key levels and below a couple of others. The small caps chart has more definitive set ups, and this one is in some limbo between 5800 and 6000. The winner of that tug-o-war will likely dictate the direction for the next several months, but that's a wide range and we could stay in it awhile if the bears can't break this below 5800 soon. Trading volume is still quite light so there's no conviction yet from the larger money managers.
DWCPF (S-fund) had a big day gaining over 1% on Tuesday, following up on Monday's positive reversal. I see that the 20-day EMA just crossed below the 50-day EMA. That often triggers a counter rally, which is exactly what we've seen the last two days, but they are also often temporary rallies. 2300 is key resistance, but unlike the Russell 2000 (IWM) chart up above, it did make its way back into the bear flag.
BND (bonds / F-fund) had a small bounce but basically it stopped going down rather than going up. Obviously the CPI report will impact bond yields so we can only speculate whether inflation is coming or going.
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.php
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.
