After a choppy morning of trading, the action yesterday resembled Tuesday's trading day, all except for that nearly 1000 point drop in the Dow in the final 30-minutes of trading in Tuesday. Instead, stocks closed closer to the highs of the day yesterday because of the tariff reprieve on automobiles. It was still a volatile day and the bears will remain in charge until the bulls can make some short-term technical improvement. Small caps had a big day but with the dollar tanking yesterday, the I-fund easily outperformed the rest of the funds.
Yesterday the automakers got a tariff reprieve for a month and that helped swing the market back to the bullish side for a day. Otherwise, the bears were making another push to sell the morning rally, and the charts have not quite changed enough to give the bulls a green light yet.
If the bulls can keep yesterday's rebound going, they'll have some decisions to make if we see those levels. There's nothing more satisfying than making a bunch of money in a bear market - if you can time it right, and you can keep it. But as I mentioned many times before, one of the biggest mistakes I ever made trading the TSP was selling the 2020 COVID crash rebound too early, and waiting for it to reverse back down.
Of course it's not as easy as buying here and assuming we are at the bottom, because very often relief rallies get sold and we get lower lows.
Yesterday's action may be trying to build a low at the bottom of that channel, but the 200-day EMA hasn't been fully tested yet. Not that it has to but notice how the pullback in late October / early November tested the 50-day EMA, then the decline that bottomed in January tested and held at the 100-day EMA.
The bottom of that channel is a clean, convenient place for a low, but should we expect to see the S&P 500 hit that 200-day EMA before this is over? On the upside, the S&P 500 (C-fund) could actually run all the way up to 5900, or even 5980 and still be in a downtrend.
Have you seen the action in Germany's stock market lately? It was up another 3.4% yesterday as their yields fell sharply after their central banks announced a stimulus package. The reason this is interesting is that, because the US economy is being seen as weakening, with interest rates currently at 4.5%, our Federal Reserve now has plenty of ammunition for stimulus to help our economy if it wobbles, and that's what triggered the rally back in 2020 despite the disaster that the economy was going through back then.
ACWX (the I-fund tracking index) was the recipient of that gain in Germany and throughout Europe, and the massive decline in the dollar yesterday was certainly a factor. So much for the bull flag on that UUP chart. Now it is staring at a couple of open gaps from back in November, which could bode well for the I-fund should they attempt to get filled.
I had been eying that 55 area for a place to buy the I-fund, but the swings during the day made any decision tough. Then you have to decide whether it would be better to buy the fund that had been hot, or the ones that were beaten down.
We'll get the February jobs report on Friday. Estimates are looking for a gain of 145,000 jobs and an unemployment rate of 4.0%.
I had written several paragraphs on the jobs report, the economy, and politics and how it may all be impacted by the new administration vs. the old guard in DC, but after rereading it I know it would hit some people the wrong way despite it being purely related to our TSP funds. Politics is controversial enough, but when Trump is involved, there's nothing I could say that would make sense to everybody, so I thought better of it. Let's just say it's been getting tougher to trust the data in the last 10 or 15 years, and who knows -- maybe much further back than that. I was just more naive then. I think most of us know what's happening.
DWCPF (S-fund) had a big day, beating the C-fund for a change, but lagging that super hot I-fund. Right now we can say that the bottom of the descending channel is holding as the breakdown wasn't confirmed after just one close below the support line. But now that it has closed below the 200-day EMA for three straight days, that line could now become resistance on any further upside.
Yields were up for a second straight day and that could just be a relief rally, and of course BND (F-fund) moves counter to yields so it is experiencing perhaps a needed rest after a nearly three week ramp higher.
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 may use additional methods and strategies to determine fund positions.
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Yesterday the automakers got a tariff reprieve for a month and that helped swing the market back to the bullish side for a day. Otherwise, the bears were making another push to sell the morning rally, and the charts have not quite changed enough to give the bulls a green light yet.
If the bulls can keep yesterday's rebound going, they'll have some decisions to make if we see those levels. There's nothing more satisfying than making a bunch of money in a bear market - if you can time it right, and you can keep it. But as I mentioned many times before, one of the biggest mistakes I ever made trading the TSP was selling the 2020 COVID crash rebound too early, and waiting for it to reverse back down.
Of course it's not as easy as buying here and assuming we are at the bottom, because very often relief rallies get sold and we get lower lows.
Yesterday's action may be trying to build a low at the bottom of that channel, but the 200-day EMA hasn't been fully tested yet. Not that it has to but notice how the pullback in late October / early November tested the 50-day EMA, then the decline that bottomed in January tested and held at the 100-day EMA.
The bottom of that channel is a clean, convenient place for a low, but should we expect to see the S&P 500 hit that 200-day EMA before this is over? On the upside, the S&P 500 (C-fund) could actually run all the way up to 5900, or even 5980 and still be in a downtrend.
Have you seen the action in Germany's stock market lately? It was up another 3.4% yesterday as their yields fell sharply after their central banks announced a stimulus package. The reason this is interesting is that, because the US economy is being seen as weakening, with interest rates currently at 4.5%, our Federal Reserve now has plenty of ammunition for stimulus to help our economy if it wobbles, and that's what triggered the rally back in 2020 despite the disaster that the economy was going through back then.
ACWX (the I-fund tracking index) was the recipient of that gain in Germany and throughout Europe, and the massive decline in the dollar yesterday was certainly a factor. So much for the bull flag on that UUP chart. Now it is staring at a couple of open gaps from back in November, which could bode well for the I-fund should they attempt to get filled.
I had been eying that 55 area for a place to buy the I-fund, but the swings during the day made any decision tough. Then you have to decide whether it would be better to buy the fund that had been hot, or the ones that were beaten down.
We'll get the February jobs report on Friday. Estimates are looking for a gain of 145,000 jobs and an unemployment rate of 4.0%.
I had written several paragraphs on the jobs report, the economy, and politics and how it may all be impacted by the new administration vs. the old guard in DC, but after rereading it I know it would hit some people the wrong way despite it being purely related to our TSP funds. Politics is controversial enough, but when Trump is involved, there's nothing I could say that would make sense to everybody, so I thought better of it. Let's just say it's been getting tougher to trust the data in the last 10 or 15 years, and who knows -- maybe much further back than that. I was just more naive then. I think most of us know what's happening.
DWCPF (S-fund) had a big day, beating the C-fund for a change, but lagging that super hot I-fund. Right now we can say that the bottom of the descending channel is holding as the breakdown wasn't confirmed after just one close below the support line. But now that it has closed below the 200-day EMA for three straight days, that line could now become resistance on any further upside.
Yields were up for a second straight day and that could just be a relief rally, and of course BND (F-fund) moves counter to yields so it is experiencing perhaps a needed rest after a nearly three week ramp higher.
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 may use additional methods and strategies to determine fund positions.
