How about those holiday reversals? Stocks sold off yesterday and I was definitely smelling a rat on Friday (or was it fishy?), but whatever animal it was, that huge surge higher late Friday was suspicious, and whether coincidence or shenanigans, it was frustrating for investors who have been looking for an opportunist to buy a pullback. So, that late rally on Friday afternoon could have been some late chasing, or capitulating from those who just couldn't stand watching stocks continuing to go up without them. Capitulations tend to cause reversals.
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On Tuesday we got an overdue pullback, but now we have to figure out how long this might last, if it lasts at all. A lot of profits were made in the last half of August after the August 5th low and investors were feeling pretty good if they were the ones making money and not the ones missing out.
The Wall Street Journal had an article yesterday that said, "Americans Are Really, Really Bullish on Stocks." Those are the types of contrarian headlines that traders look for when trying to find market turns. Obviously it is debatable whether we are near a market top or if its just a much needed pullback, but that headline could be a wake up call.
If not for Friday's suspicious rally, the stock market didn't have much of a pre-holiday reversal as the indices were sagging or choppy before Friday, but we did see the reversal in the 10-year Treasury Yield which rallied all week last week, and came tumbling down on Tuesday. That may mark a new lower high, although technically that "U" bottom can still be considered intact.
The dollar had the pre-holiday reversal off the August 26 low, but it did not have a post holiday reversal back down like the 10-year yield did. It was up again and that adds to pricing trouble.
Another chart having trouble with another lower high is Nvidia after another near 10% decline yesterday.
We've been tracking the semiconductors lately knowing the broader market can have trouble if the semis are not participating in the rally, and they have certainly been lagging lately. Nvidia's decline didn't help as the SOX Index was down almost 8% yesterday.
Another market leader, the Dow Transportation Index, is actually holding up despite yesterday's 1.15% loss. It remained in the recent trading range, as opposed to what we saw in the other charts. This is a slightly bullish indication, but if this chart succumbs to the selling pressure, all bets are off. Just a reminder that last week I mentioned that this could be a test of the head of a bearish head and shoulders pattern, in which case a move above that red box could be tough and it could fail here.
One more possible concern - oil. The new lows yesterday could mean a couple of things. It could be a sign of less demand because the economy is slowing or, per Tom Lee of FundStrat, it could be the market is pricing in a Trump victory as they would expect supply to increase, thus lower prices. I don't know, but new lows means something is different.
This week will culminate with the August jobs report, which of course could impact the Fed's decision on interest rates. Too strong and the Fed may rethink the size of its rate cut. Too weak and we'd have to start worrying about economic growth. Right now the market is pricing in a 61% chance of a 0.25% rate cut, and 39% chance of a 0.50% cut at the September 18 meeting.
The job estimates are looking for a gain of about 165,000 jobs in August after the 114,000 miss last month, plus the 818,000 negative revision for the prior year. That revision makes this August number, the first one since the revision, very interesting as it could give them some wiggle room to go high with the number. The unemployment rate is expected to come in at 4.2%.
The August AutoTracker winners have been posted and it was a wild month! Here are the winners and here are the monthly and annual (non-premium members) standings through August. Track your return on the AutoTracker - it's free!
Administrative Note: It's time for the 2024 NFL Survivor Contest. It's easy, and free! Deadline is Sunday Sep 8 at 1 PM ET: More information
The S&P 500 (C-fund) opened lower and broke down to some degree as it closed back below its 20-day EMA. It still has an open gap and the 50-day EMA below 5500 if it's looking for a reason to go lower. 5400 looks like another potential target as it is the level of the left shoulder of the inverted head and shoulders pattern. See the S-fund chart below for more on that.
The DWCPF (S-fund) is also in the process of possibly filling in the right shoulder of an inverted head and shoulders pattern. The right and left shoulders don't have to be equal in size, but in a perfect world the right shoulder would hold at the left shoulder's low, and that's where yesterday's low was. It was also where the 50-day EMA was sitting so can it hold here or does that open gap by 2040 need to get filled during this pullback?
The EFA (I-fund) had the F-flag and rising wedge look to it as we talked about yesterday, and as I said these tend to eventually break down, but it's tough to know when. Now we know. I'm hoping this does more backing and filling to clean up at least one or two of those open gaps below so we can stop worrying about them.
BND (F-fund) rallied nicely but it failed to breakout despite the sell off in stocks giving in an opportunity to do so. That makes this chart a little suspect, even though the cup and handle formation is still bullish looking.
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.
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On Tuesday we got an overdue pullback, but now we have to figure out how long this might last, if it lasts at all. A lot of profits were made in the last half of August after the August 5th low and investors were feeling pretty good if they were the ones making money and not the ones missing out.
The Wall Street Journal had an article yesterday that said, "Americans Are Really, Really Bullish on Stocks." Those are the types of contrarian headlines that traders look for when trying to find market turns. Obviously it is debatable whether we are near a market top or if its just a much needed pullback, but that headline could be a wake up call.
If not for Friday's suspicious rally, the stock market didn't have much of a pre-holiday reversal as the indices were sagging or choppy before Friday, but we did see the reversal in the 10-year Treasury Yield which rallied all week last week, and came tumbling down on Tuesday. That may mark a new lower high, although technically that "U" bottom can still be considered intact.

The dollar had the pre-holiday reversal off the August 26 low, but it did not have a post holiday reversal back down like the 10-year yield did. It was up again and that adds to pricing trouble.
Another chart having trouble with another lower high is Nvidia after another near 10% decline yesterday.

We've been tracking the semiconductors lately knowing the broader market can have trouble if the semis are not participating in the rally, and they have certainly been lagging lately. Nvidia's decline didn't help as the SOX Index was down almost 8% yesterday.
Another market leader, the Dow Transportation Index, is actually holding up despite yesterday's 1.15% loss. It remained in the recent trading range, as opposed to what we saw in the other charts. This is a slightly bullish indication, but if this chart succumbs to the selling pressure, all bets are off. Just a reminder that last week I mentioned that this could be a test of the head of a bearish head and shoulders pattern, in which case a move above that red box could be tough and it could fail here.

One more possible concern - oil. The new lows yesterday could mean a couple of things. It could be a sign of less demand because the economy is slowing or, per Tom Lee of FundStrat, it could be the market is pricing in a Trump victory as they would expect supply to increase, thus lower prices. I don't know, but new lows means something is different.

This week will culminate with the August jobs report, which of course could impact the Fed's decision on interest rates. Too strong and the Fed may rethink the size of its rate cut. Too weak and we'd have to start worrying about economic growth. Right now the market is pricing in a 61% chance of a 0.25% rate cut, and 39% chance of a 0.50% cut at the September 18 meeting.
The job estimates are looking for a gain of about 165,000 jobs in August after the 114,000 miss last month, plus the 818,000 negative revision for the prior year. That revision makes this August number, the first one since the revision, very interesting as it could give them some wiggle room to go high with the number. The unemployment rate is expected to come in at 4.2%.
The August AutoTracker winners have been posted and it was a wild month! Here are the winners and here are the monthly and annual (non-premium members) standings through August. Track your return on the AutoTracker - it's free!
Administrative Note: It's time for the 2024 NFL Survivor Contest. It's easy, and free! Deadline is Sunday Sep 8 at 1 PM ET: More information
The S&P 500 (C-fund) opened lower and broke down to some degree as it closed back below its 20-day EMA. It still has an open gap and the 50-day EMA below 5500 if it's looking for a reason to go lower. 5400 looks like another potential target as it is the level of the left shoulder of the inverted head and shoulders pattern. See the S-fund chart below for more on that.

The DWCPF (S-fund) is also in the process of possibly filling in the right shoulder of an inverted head and shoulders pattern. The right and left shoulders don't have to be equal in size, but in a perfect world the right shoulder would hold at the left shoulder's low, and that's where yesterday's low was. It was also where the 50-day EMA was sitting so can it hold here or does that open gap by 2040 need to get filled during this pullback?

The EFA (I-fund) had the F-flag and rising wedge look to it as we talked about yesterday, and as I said these tend to eventually break down, but it's tough to know when. Now we know. I'm hoping this does more backing and filling to clean up at least one or two of those open gaps below so we can stop worrying about them.

BND (F-fund) rallied nicely but it failed to breakout despite the sell off in stocks giving in an opportunity to do so. That makes this chart a little suspect, even though the cup and handle formation is still bullish looking.

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.