Stocks rallied on Wednesday as the back and forth action continues, and charts start to test some key overhead resistance. The Dow gained 596-points on the day which was about the same amount that it had lost on Tuesday (-598). Small caps led with a gain of over 2% after Tuesday's 1.8% loss, so the moves in both direction have been large, and there's no clear direction just yet. Oil continues to skyrocket closing above $110 a barrel yesterday.
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The S&P 500 (C-fund) plowed ahead as the back and forth action continued and the S&P 500 finds itself just below that 200-day EMA. In a bear market (or bearish market) that can be an area that is tough to recapture. It got back above that average in January after a short struggle below it, but since then has fallen back below it and the bears may try to make a stand. If it can recapture that 200-day average, the 50-day average is less than 100 points above it. We haven't seen two consecutive closes above the 50-day average since January 12th.
The DWCPF (small caps / S-fund) has been moving sharply in both directions but it is still sitting about where it was 6 weeks ago. Maybe that's a good sign that it hasn't lost more ground, but it has also failed repeatedly at the 50-day average since it broke below it in mid November.
The EFA (I-fund) had a good day but lagged a bit as it drags itself off the recent lows. It remains below some old support, which could now act as resistance. It may take a major catalyst to get this back on the bullish side.
BND (Bonds / F-fund) flipped right back over yesterday after the big three day rally. It did a good job of filling some gaps (blue) but there are a few open gaps as well (red.) The 50-day EMA acted like a brick wall, easily swatting back the rally and turning the ship back around.
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
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.
Thanks for reading. We'll see you back here tomorrow.
Tom Crowley
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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The post State of the Union address reaction, combined with Fed Chair Jerome Powell's testifying before congress yesterday, gave the stock market a spark as inventors were fed mostly what they wanted to hear, but in reality it's still wait and see as we know rate hikes are coming, inflation is on the rise, oil is $110 a barrel, there's a war overseas, and (fill in the blank.)
The stock market has been chopping back and forth since the initial reaction to the invasion of Ukraine. The bond market is flip flopping as well as the yield on the 10-year Treasury shot up over 2% earlier this month, sank back down to 1.7% on Tuesday, and yesterday it ran up to 1.87%. No one seems to know what to make of all this.
The market does not like uncertainly, but it also feeds on fear and we have a lot of both right now, making this very a confusing time, and that is causing the volatility to remain elevated as the VIX closed above 30 for a 3rd straight day.
Oil is still a big story, and combined with interest rate hikes, the prices Americans are paying at the pump is a tough combination for consumers. Spending will likely be impacted and that in turn will hamper the economic growth, and as we mentioned the other day the Atlanta Fed has lowered the 1st quarter GDP to 0.0%. Inflation and no growth is not a good combination.
But the market is a forward looking indicator and a lot of this may be priced in already. The question is whether it has priced in the possibility of corporate earnings estimates being lowered. Analysts have not lowered their earnings estimates yet, but with all of the changes coming that would negatively impact corporate costs - higher energy costs, higher interest rates, and higher corporate taxes - isn't that inevitable?
Like most SOTU addresses, the President promised a lot of "investing" aka spending, to help the economy, but it's been the COVID stimulus spending that helped get us into this current inflationary environment, so they're in a tough spot.
The stock market has been chopping back and forth since the initial reaction to the invasion of Ukraine. The bond market is flip flopping as well as the yield on the 10-year Treasury shot up over 2% earlier this month, sank back down to 1.7% on Tuesday, and yesterday it ran up to 1.87%. No one seems to know what to make of all this.
The market does not like uncertainly, but it also feeds on fear and we have a lot of both right now, making this very a confusing time, and that is causing the volatility to remain elevated as the VIX closed above 30 for a 3rd straight day.
Oil is still a big story, and combined with interest rate hikes, the prices Americans are paying at the pump is a tough combination for consumers. Spending will likely be impacted and that in turn will hamper the economic growth, and as we mentioned the other day the Atlanta Fed has lowered the 1st quarter GDP to 0.0%. Inflation and no growth is not a good combination.
But the market is a forward looking indicator and a lot of this may be priced in already. The question is whether it has priced in the possibility of corporate earnings estimates being lowered. Analysts have not lowered their earnings estimates yet, but with all of the changes coming that would negatively impact corporate costs - higher energy costs, higher interest rates, and higher corporate taxes - isn't that inevitable?
Like most SOTU addresses, the President promised a lot of "investing" aka spending, to help the economy, but it's been the COVID stimulus spending that helped get us into this current inflationary environment, so they're in a tough spot.
The S&P 500 (C-fund) plowed ahead as the back and forth action continued and the S&P 500 finds itself just below that 200-day EMA. In a bear market (or bearish market) that can be an area that is tough to recapture. It got back above that average in January after a short struggle below it, but since then has fallen back below it and the bears may try to make a stand. If it can recapture that 200-day average, the 50-day average is less than 100 points above it. We haven't seen two consecutive closes above the 50-day average since January 12th.
The DWCPF (small caps / S-fund) has been moving sharply in both directions but it is still sitting about where it was 6 weeks ago. Maybe that's a good sign that it hasn't lost more ground, but it has also failed repeatedly at the 50-day average since it broke below it in mid November.
The EFA (I-fund) had a good day but lagged a bit as it drags itself off the recent lows. It remains below some old support, which could now act as resistance. It may take a major catalyst to get this back on the bullish side.
BND (Bonds / F-fund) flipped right back over yesterday after the big three day rally. It did a good job of filling some gaps (blue) but there are a few open gaps as well (red.) The 50-day EMA acted like a brick wall, easily swatting back the rally and turning the ship back around.
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
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.
Thanks for reading. We'll see you back here tomorrow.
Tom Crowley
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.
