After a weekend of turkey sandwiches, the stock market had a little too much tryptophan in its system, and was doing a lot of napping on Monday. Stocks were sluggish, which is about what the seasonality chart suggests happens after the bullish activity during Thanksgiving week. The Dow lost 57-points and the modest losses permeated throughout most of the broader indices as well. Yields were down giving the bonds and the F-fund a nice bounce back day.
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It was a quiet day and nothing really changed. Stocks have some very large gains over the past four weeks making the case for a pullback compelling. Momentum is on the bulls' side but it's getting rather frothy on the bullish sentiment side where every pundit on TV is telling us how much stocks will continue to rally into the end of the year. That is usually a recipe for a pullback, but seasonality is still on those bulls' side.
The Yield on the 10-Year Treasury was down sharply after Friday's rally push it above that falling wedge formation. This declined helped the F-fund have a big day, on a day where stocks were down, which is different as stocks and bond yields had been moving counter to each other for quite a while.
The dollar was also down as it flirts with filling that open gap from back in early September. The I-fund did not take advantage of this which may be telling us that the overseas markets were weaker than what we saw in their indices yesterday.
The market leading Dow Transportation Index fell below the F-flag yesterday after a 1.26% decline. That's typical of those F-flags but there is a lot of support just underneath where the 50 and 200-day EMAs are sitting, so this will be an interesting test, especially with those open gaps below the averages luring the index down.
The small caps of the Russell 2000 have been moving sideways since hitting and failing at its 200-day EMA 8 days ago, but the formation looks fairly bullish - almost a cup and handle look - if it can break through that resistance. The question here for the small caps is whether they need to fill those gaps after the large rally off the October lows, before it breaks above that 200-day average?
We'll get a 3rd quarter GDP estimate on Wednesday, and key inflation data on Thursday with the PCE Prices and the Personal Income and Spending reports.
The S&P 500 (C-fund) continued to trade within that narrow gap from back in late July, so the bulls have not been able to push it above that gap, but the bears have been unable to smack it down for a typical double top pullback either, although the actual double top would be above 4600, so that is still a possible upside target, even it we do see a pullback afterward. The rising support line was broken in recent days but that angle of incline was not sustainable.
DWCPF (S-fund) is still waving that F-flag, typically a bearish formation as they tend to eventually break down, but while the flag is forming, it could continue slide higher for longer than we'd expect. I am anticipating at least one of the open gaps to get filled below, but those moving averages are between the current level and those gaps, so there is plenty of support.
EFA (I-fund) continues to climb within the ascending trading channel, but it was down yesterday despite the decline in the dollar, so that may be a tell. It may be too early to say that, but it's come a long way with very little dipping along the way.
BND (bonds / F-fund) had a big day yesterday, recouping the big losses from Friday and closing at a new multi-month high. It's back above the 200-day EMA, but yada, yada, yada... those open gaps.
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
For more info our other premium services, please go here... www.tsptalk.com/premiums.html
Daily Market Commentary Archives
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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It was a quiet day and nothing really changed. Stocks have some very large gains over the past four weeks making the case for a pullback compelling. Momentum is on the bulls' side but it's getting rather frothy on the bullish sentiment side where every pundit on TV is telling us how much stocks will continue to rally into the end of the year. That is usually a recipe for a pullback, but seasonality is still on those bulls' side.
The Yield on the 10-Year Treasury was down sharply after Friday's rally push it above that falling wedge formation. This declined helped the F-fund have a big day, on a day where stocks were down, which is different as stocks and bond yields had been moving counter to each other for quite a while.
The dollar was also down as it flirts with filling that open gap from back in early September. The I-fund did not take advantage of this which may be telling us that the overseas markets were weaker than what we saw in their indices yesterday.
The market leading Dow Transportation Index fell below the F-flag yesterday after a 1.26% decline. That's typical of those F-flags but there is a lot of support just underneath where the 50 and 200-day EMAs are sitting, so this will be an interesting test, especially with those open gaps below the averages luring the index down.
The small caps of the Russell 2000 have been moving sideways since hitting and failing at its 200-day EMA 8 days ago, but the formation looks fairly bullish - almost a cup and handle look - if it can break through that resistance. The question here for the small caps is whether they need to fill those gaps after the large rally off the October lows, before it breaks above that 200-day average?
We'll get a 3rd quarter GDP estimate on Wednesday, and key inflation data on Thursday with the PCE Prices and the Personal Income and Spending reports.
The S&P 500 (C-fund) continued to trade within that narrow gap from back in late July, so the bulls have not been able to push it above that gap, but the bears have been unable to smack it down for a typical double top pullback either, although the actual double top would be above 4600, so that is still a possible upside target, even it we do see a pullback afterward. The rising support line was broken in recent days but that angle of incline was not sustainable.
DWCPF (S-fund) is still waving that F-flag, typically a bearish formation as they tend to eventually break down, but while the flag is forming, it could continue slide higher for longer than we'd expect. I am anticipating at least one of the open gaps to get filled below, but those moving averages are between the current level and those gaps, so there is plenty of support.
EFA (I-fund) continues to climb within the ascending trading channel, but it was down yesterday despite the decline in the dollar, so that may be a tell. It may be too early to say that, but it's come a long way with very little dipping along the way.
BND (bonds / F-fund) had a big day yesterday, recouping the big losses from Friday and closing at a new multi-month high. It's back above the 200-day EMA, but yada, yada, yada... those open gaps.
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
For more info our other premium services, please go here... www.tsptalk.com/premiums.html
Daily Market Commentary Archives
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.
