Stocks got off to a good start on Friday but things immediately started to go south after the release of the Consumer Confidence report. The indices were mixed, but mostly lower as tech and small caps lagged on the day, as did the I-fund. The S&P 500 (C-fund), I-fund, and F-fund did post gains for the week, while the small caps gave up 1%.
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The S&P 500 peaked at 9:54 AM ET on Friday and whether coincidence or not, that may have been because the University of Michigan Consumer Confidence Report was released at 10:00 AM and it came in at 63.0, quite a bit below the 67.5 that was expected, and below the prior month's reading of 68.1.
We've got a couple of weeks before the big market moving earnings reports from big tech start coming in, but so far 90% of S&P 500 earnings reported have beat estimates. Maybe that's not good enough, I don't know. The chances of an interest rate hike at the FOMC meeting on November 1st is down to 6.2%, so I believe it's safe the Fed is done this year. And they are done raising, that may open the door to some higher earnings guidance for the 4th quarter?
We saw some banks reporting last week and on Friday the XLF financial sector ETF was actually up 0.21% on the day, but like many charts, it is still below some tough resistance to overcome.
The bears certainly have their arguments whet stocks should go down, and it's a long list. Many of those items will hinge on whether or not yields are done going up, and same for the dollar, although right now they seem to be moving together and possibly at a pivot point.
There's a lot of trouble on the daily charts but the weekly charts do look better. There was a negative kangaroo tail created last week that reversed below the 20-week moving average (green), but the positive close and gain of 0.45% on the week keeps me from calling it a negative reversal week. We've seen several of these and while we could have a negative week, none of the ones circled below created a lower low for the week, so it may be telling us that 4300 could hold. And that's a key level since 4240 looks like the line in the sand for the bulls.
The price of oil came back to life last week, and that's not a trend the stock market bulls want to see continue. The oil bulls may be happy, but there's still a chance that is turns into a bear flag. The 200-day EMA has been holding and as long as that is the case, we have to assume the trend will remain up.
Fortunately the price of gasoline has not been trending in the same direction, as it normally does. Odd but true.
The October seasonality chart favors the bulls this week, but that will change next week. October is a tough month to gauge with these 30 year charts because when stocks do poorly in October, it can be extremely poor. But otherwise it's actually a decent month if you overlook the those disaster crash years like 1929, 1987, or 2008, and it is actually a month that has experienced many correction lows over the years.
Chart provided courtesy of www.sentimentrader.com
We'll get retail sales and some housing data this week, but earnings, geopolitical events, yields and the dollar will keep us on our toes as we watched for the latest catalysts. The TSP charts look questionable, but some index charts have more life than others. The more aggressive S and I-funds look broken and the risks are high, however they can provide more bang for the buck on rebounds.
The S&P 500 (C-fund) has been trending lower for weeks now and its recent inability to get back above its 50-day EMA is concerning. Seasonality improves this week and into the end of the year, although as I mentioned earlier, next week can be bumpy. October has a bad reputation but it has been the month for market bottoms and so far the lows this month, and for this recent pullback / correction, has been during the first week of October. A test of those lows is not out of the question. The PMO (price momentum indicator) positive crossover from early last week was a sign of being overbought in the short-term, but after a brief pullback, that has been somewhat alleviated.
DWCPF (S-fund, small caps) is a mess and really needs to hold the previous lows and get back above the descending resistance line and the confluence of resistance in the 1730 area.
The EFA (I-fund) has also been one to avoid with the dollar rallying. The dollar did show signs of possibly breaking down last week and that could have opened the door for the I-fund to rally, but the dollar came right back late last week, keeping the pressure on this fund.
BND (bonds / F-fund) was up nicely on Friday after the sell off on Thursday. The open gap below did not get filled on the pullback and it is facing some descending resistance now. It looks like the Fed is done raising rates for the year and that could stabilize the bond market and actually make it appealing.
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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The S&P 500 peaked at 9:54 AM ET on Friday and whether coincidence or not, that may have been because the University of Michigan Consumer Confidence Report was released at 10:00 AM and it came in at 63.0, quite a bit below the 67.5 that was expected, and below the prior month's reading of 68.1.
We've got a couple of weeks before the big market moving earnings reports from big tech start coming in, but so far 90% of S&P 500 earnings reported have beat estimates. Maybe that's not good enough, I don't know. The chances of an interest rate hike at the FOMC meeting on November 1st is down to 6.2%, so I believe it's safe the Fed is done this year. And they are done raising, that may open the door to some higher earnings guidance for the 4th quarter?
We saw some banks reporting last week and on Friday the XLF financial sector ETF was actually up 0.21% on the day, but like many charts, it is still below some tough resistance to overcome.
The bears certainly have their arguments whet stocks should go down, and it's a long list. Many of those items will hinge on whether or not yields are done going up, and same for the dollar, although right now they seem to be moving together and possibly at a pivot point.
There's a lot of trouble on the daily charts but the weekly charts do look better. There was a negative kangaroo tail created last week that reversed below the 20-week moving average (green), but the positive close and gain of 0.45% on the week keeps me from calling it a negative reversal week. We've seen several of these and while we could have a negative week, none of the ones circled below created a lower low for the week, so it may be telling us that 4300 could hold. And that's a key level since 4240 looks like the line in the sand for the bulls.
The price of oil came back to life last week, and that's not a trend the stock market bulls want to see continue. The oil bulls may be happy, but there's still a chance that is turns into a bear flag. The 200-day EMA has been holding and as long as that is the case, we have to assume the trend will remain up.
Fortunately the price of gasoline has not been trending in the same direction, as it normally does. Odd but true.
The October seasonality chart favors the bulls this week, but that will change next week. October is a tough month to gauge with these 30 year charts because when stocks do poorly in October, it can be extremely poor. But otherwise it's actually a decent month if you overlook the those disaster crash years like 1929, 1987, or 2008, and it is actually a month that has experienced many correction lows over the years.
Chart provided courtesy of www.sentimentrader.com
We'll get retail sales and some housing data this week, but earnings, geopolitical events, yields and the dollar will keep us on our toes as we watched for the latest catalysts. The TSP charts look questionable, but some index charts have more life than others. The more aggressive S and I-funds look broken and the risks are high, however they can provide more bang for the buck on rebounds.
The S&P 500 (C-fund) has been trending lower for weeks now and its recent inability to get back above its 50-day EMA is concerning. Seasonality improves this week and into the end of the year, although as I mentioned earlier, next week can be bumpy. October has a bad reputation but it has been the month for market bottoms and so far the lows this month, and for this recent pullback / correction, has been during the first week of October. A test of those lows is not out of the question. The PMO (price momentum indicator) positive crossover from early last week was a sign of being overbought in the short-term, but after a brief pullback, that has been somewhat alleviated.
DWCPF (S-fund, small caps) is a mess and really needs to hold the previous lows and get back above the descending resistance line and the confluence of resistance in the 1730 area.
The EFA (I-fund) has also been one to avoid with the dollar rallying. The dollar did show signs of possibly breaking down last week and that could have opened the door for the I-fund to rally, but the dollar came right back late last week, keeping the pressure on this fund.
BND (bonds / F-fund) was up nicely on Friday after the sell off on Thursday. The open gap below did not get filled on the pullback and it is facing some descending resistance now. It looks like the Fed is done raising rates for the year and that could stabilize the bond market and actually make it appealing.
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.
