Stocks followed Tuesday's negative reversal with a positive reversal after a deep midday sell-off was quickly bought up again. The Dow gained 553-points in quite a rollercoaster ride of a day. In late morning trading it looked like the Nasdaq, which opened higher on the day, was about to crash as it was down 200 points (more than 2%) in the blink of an eye but it bounced back the rest of the day closing up 72-points, or +0.77%. Crazy day. The bulls are apparently still very serious.
[TABLE="align: center"]
[TR]
[TD="align: center"] Daily TSP Funds Return
[TABLE="align: center"]
[TR]
[TD="align: right"] [/TD]
[/TR]
[/TABLE]
[/TD]
[TD][/TD]
[TD="align: center"]
[/TD]
[/TR]
[/TABLE]
At some point I'll be right. I just hope it's in my lifetime. The market is always right, however. Before my time in this world is up, hopefully many years from now, I'd like to see a stock market that makes more sense than it has been making over the last 10+ years, perhaps going back to just after the financial crisis when stimulus, quantitative easing, and bailouts started to come at the drop of a hat.
I fully understand that stocks don't always go up because there is good news, or go down when there's bad. Stocks prices look forward, not backwards, and we often see "buy the rumor, sell the news" reactions that can frustrate the small traders who hear news, expect a result and see the opposite happen. That's how it used to be, anyway.
The charts themselves don't look bad. Maybe it's my fault for finally looking at the fundamentals of the market - something I usually only look at secondarily, but the state of the economy after the coronavirus crash had me looking in a different direction. My instincts told me a test of the lows was imminent. My trading system is designed based on tradition market movement and repeating chart patterns. None of those things were happening.
We've seen several years now where our "dumb money" indicators representing the average investor, who used to be behind the curve, have done much better than the so called "smart money" as they are benefiting more from irrational market action.
We have an over active Fed that can manipulate economic conditions, which sounds good, but it also brings on a boom and bust type of economic environment. Stocks go up seemingly endlessly, until they don't, and then they crash. It's capitalism with a twist.
I feel like I'm about to wave the preverbal white flag on my bearish outlook. Not that I won't be bearish, I just get tired of writing about obvious concerns, only to see the stock market race up day after day in an environment that is as bad as we have seen in our lifetime. Yes, it may be a short-term blip and things will get better at some point, but do stocks have to race to new highs while a quarter to third of our workforce is out of a job, and while we're seeing devastating negative GDP growth?
Recently I've shown charts of historical valuations for stocks and how they had become overvalued to a point where we'd expect an extreme under-performance from stocks for the next 10 -12 years based on these valuation. And yes, stocks are still negative for the year but not much anymore, and it took the economy shutting down to a halt to do it.
I think I will leave you with just a couple of charts today, that I think say a lot. In my attempt to wrap my head around why the dumb money has been so rewarded in recent years, I went and found a chart of what company insiders are doing right now. I don't think it needs much explanation.
This chart goes back to 2012 when this indicator's data begins, and possibly about the time when the dumb money was becoming the smartest investors in the world. You can see that something happened in 2014 to insiders, and it's oddly comforting to see that they seem as confused as I am. Apparently they see their own stocks as too pricey as well.
One of the more obvious explanations is that the smart money, or big money, are expecting a pullback or a test of the lows, so they are sitting on the sidelines with a ton of cash, and cash is the ammunition for market rallies. The dumb money is basking in the rally and the smart money is left to chase, or wait. Chasing is rarely a good option, but it has worked for many over the last couple of months.
There was and is a concerted effort by the media, some politicians, and others in this country to try to keep the economy from opening back up... fully anyway, in the name of public safety. Just turn on your TV. It's all they are talking about. Right or wrong, they clearly had their impact in the first half of this year, and I suspect they aren't going away anytime soon. They are expecting a second wave of the virus to breakout if everything is opened back up. Will there be another wave? Can the market survive another wave? Or has it already dismissed COVID-19 as a hiccup that it came now move on from? Right now, it doesn't seem too worried.
The S&P 500 (C-fund) failed on Tuesday to close above that 200-day MA (simple average) but yesterday the bulls showed us something as stocks came back from a wicked midday sell-off to push back to a new multi-month highs, and yes, it closed above the 200-day MA for the first time since March 3.
The BND (F-fund) was up and briefly made a new high yesterday. The yield on the 10-year and 30-year bonds were down, but for some reason the longer term bond ETF (TLT) was also down. They normally move counter to each other. Anyway, that is likely to leave the F-fund somewhere in between the BND and TLT prices - the price hadn't been posted as of this writing.
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
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.
[TABLE="align: center"]
[TR]
[TD="align: center"] Daily TSP Funds Return
[TR]
[TD="align: right"] [/TD]
[/TR]
[/TABLE]
[/TD]
[TD][/TD]
[TD="align: center"]
[/TR]
[/TABLE]
At some point I'll be right. I just hope it's in my lifetime. The market is always right, however. Before my time in this world is up, hopefully many years from now, I'd like to see a stock market that makes more sense than it has been making over the last 10+ years, perhaps going back to just after the financial crisis when stimulus, quantitative easing, and bailouts started to come at the drop of a hat.
I fully understand that stocks don't always go up because there is good news, or go down when there's bad. Stocks prices look forward, not backwards, and we often see "buy the rumor, sell the news" reactions that can frustrate the small traders who hear news, expect a result and see the opposite happen. That's how it used to be, anyway.
The charts themselves don't look bad. Maybe it's my fault for finally looking at the fundamentals of the market - something I usually only look at secondarily, but the state of the economy after the coronavirus crash had me looking in a different direction. My instincts told me a test of the lows was imminent. My trading system is designed based on tradition market movement and repeating chart patterns. None of those things were happening.
We've seen several years now where our "dumb money" indicators representing the average investor, who used to be behind the curve, have done much better than the so called "smart money" as they are benefiting more from irrational market action.
We have an over active Fed that can manipulate economic conditions, which sounds good, but it also brings on a boom and bust type of economic environment. Stocks go up seemingly endlessly, until they don't, and then they crash. It's capitalism with a twist.
I feel like I'm about to wave the preverbal white flag on my bearish outlook. Not that I won't be bearish, I just get tired of writing about obvious concerns, only to see the stock market race up day after day in an environment that is as bad as we have seen in our lifetime. Yes, it may be a short-term blip and things will get better at some point, but do stocks have to race to new highs while a quarter to third of our workforce is out of a job, and while we're seeing devastating negative GDP growth?
Recently I've shown charts of historical valuations for stocks and how they had become overvalued to a point where we'd expect an extreme under-performance from stocks for the next 10 -12 years based on these valuation. And yes, stocks are still negative for the year but not much anymore, and it took the economy shutting down to a halt to do it.
I think I will leave you with just a couple of charts today, that I think say a lot. In my attempt to wrap my head around why the dumb money has been so rewarded in recent years, I went and found a chart of what company insiders are doing right now. I don't think it needs much explanation.
This chart goes back to 2012 when this indicator's data begins, and possibly about the time when the dumb money was becoming the smartest investors in the world. You can see that something happened in 2014 to insiders, and it's oddly comforting to see that they seem as confused as I am. Apparently they see their own stocks as too pricey as well.
One of the more obvious explanations is that the smart money, or big money, are expecting a pullback or a test of the lows, so they are sitting on the sidelines with a ton of cash, and cash is the ammunition for market rallies. The dumb money is basking in the rally and the smart money is left to chase, or wait. Chasing is rarely a good option, but it has worked for many over the last couple of months.
There was and is a concerted effort by the media, some politicians, and others in this country to try to keep the economy from opening back up... fully anyway, in the name of public safety. Just turn on your TV. It's all they are talking about. Right or wrong, they clearly had their impact in the first half of this year, and I suspect they aren't going away anytime soon. They are expecting a second wave of the virus to breakout if everything is opened back up. Will there be another wave? Can the market survive another wave? Or has it already dismissed COVID-19 as a hiccup that it came now move on from? Right now, it doesn't seem too worried.
The S&P 500 (C-fund) failed on Tuesday to close above that 200-day MA (simple average) but yesterday the bulls showed us something as stocks came back from a wicked midday sell-off to push back to a new multi-month highs, and yes, it closed above the 200-day MA for the first time since March 3.
The BND (F-fund) was up and briefly made a new high yesterday. The yield on the 10-year and 30-year bonds were down, but for some reason the longer term bond ETF (TLT) was also down. They normally move counter to each other. Anyway, that is likely to leave the F-fund somewhere in between the BND and TLT prices - the price hadn't been posted as of this writing.
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
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.
