Where's all this pre-election volatility? Stocks ended another positive week with a rally on Friday. Tech led thanks to the gains in Netflix, which helped the Nasdaq, and to a lesser degree, the S&P 500, but small caps lagged a bit with the Russell 2000 down on the day, although the S-fund managed a modest 0.19% gain. Bonds were up as yields popped then dropped on Friday.
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Stocks were up for the week with the C and I-funds picking up about 0.8%, and small caps of the S-fund led with a 1.2% gain. Bonds were down for the week as the yield on the 10-year Treasury remained above 4.0%, but it hasn't been able to remain above its 200-day EMA so there seems to be a little resistance. As long as that blue line holds, the F-fund could have a little breeze at its back this week.
The dollar has also been rising in October, but it's never quite as easy to put your finger on why the dollar does what it does. There are so many factors. But we do know that a strong dollar puts more pressure on the I-fund, and when the dollar is weak, it can be beneficial to the I fund. So, whether that filled gap near 29.1 holds as resistance or not could help decide if it is time to add the I-fund to our game plan going forward. If it pulls back to fill in some or all of those red open gaps, the I-fund could outperform. It doesn't necessarily mean it will go up, but it would likely do better than the US funds. If the dollar keeps rallying, the opposite would be more true.
This coming week is historically one of the worst weeks of the year for stocks. That doesn't take into consideration the odd impact of election years. We've shown this chart many times this year and we noted how weak September and October have been in the past during election years. But the chart also showed us that it tends to do better when we have an incumbent president running (green line), which we don't, but it is an odd situation where the incumbent party has a new nominee, but they didn't go through a primary process. Does it matter? Maybe, because this year is acting more like the green line, rather than the open field red line.
A close look at the green line in September and October shows that stocks hold up well and then do really well after the election in November. But, there is one little slam down at the end of October on all of the lines on this chart, including the green line, before a November rally. Is this the week?
The 30 year October chart shows the "worst week" record which turns red starting tomorrow, although a lot of those large red lines were influenced by the large losses during the 2008 bear market that took a beating in October of that year. By the way, 2008 was an election year, so...
Chart provided courtesy of www.sentimentrader.com
Admin Note: We will be working on a server and software upgrade this week that could disrupt the website periodically. The maintenance could take part or all of the website down at times hindering access, but it will not impact Premium Service email and text alerts. I'll keep you posted.
The S&P 500 (C-fund) was up nicely on Friday, pushing it back above the top of that rising wedge formation again. This could certainly breakout again and start another leg higher, but the wedge formation suggests it may not be that easy as they tend to eventually break down. So, being above the resistance is a good sign, but it's so close and trend lines aren't always perfect. It's still in the neighborhood.
DWCPF (S-fund) was also up on Friday and although it lagged on the day, it did lead last week and it is leading for the month of October with a gain of 3.2%. These charts are long term charts and you can see that no matter how you slice it, the S-fund may be above the long-term trading channel, which makes it a little vulnerable.
On the other hand, if you look at a log scale chart, or logarithmic scale, you can see the size of the moves in percentages rather than linear straight points. In other words a 100 point move in the chart is more significant when it was trading near 400 than when it trades near 2000. Anyway, there is an argument that can be made that in the log scale chart it is closer to some support than resistance. That's a more risky viewpoint, but as I said, it's arguable.
The I-fund gained 0.56% on Friday: By comparison the EFA was up 0.68%, ACWX was up 0.75%, and the "ex USA ex China ex Hong Kong Index" was up 0.44%. This guessing game for the daily I-fund price may go on through the end of the year as the TSP transitions into the new tracking index, which is supposed to eventually mimic the "ex USA ex China ex Hong Kong Index." You can see the TSP's eventual final daily price and return posted on our site each evening.
BND (bonds / F-fund) was up slightly but closed at the lows of the day on Friday. There's support near 73.75 and an open gap up near 74.60. The bond market started pricing in a Fed that is less likely to cut rates aggressively when it peaked in September. Has that now been fully priced in? Bonds and the F-fund move counter to yields.
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.html
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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Stocks were up for the week with the C and I-funds picking up about 0.8%, and small caps of the S-fund led with a 1.2% gain. Bonds were down for the week as the yield on the 10-year Treasury remained above 4.0%, but it hasn't been able to remain above its 200-day EMA so there seems to be a little resistance. As long as that blue line holds, the F-fund could have a little breeze at its back this week.
The dollar has also been rising in October, but it's never quite as easy to put your finger on why the dollar does what it does. There are so many factors. But we do know that a strong dollar puts more pressure on the I-fund, and when the dollar is weak, it can be beneficial to the I fund. So, whether that filled gap near 29.1 holds as resistance or not could help decide if it is time to add the I-fund to our game plan going forward. If it pulls back to fill in some or all of those red open gaps, the I-fund could outperform. It doesn't necessarily mean it will go up, but it would likely do better than the US funds. If the dollar keeps rallying, the opposite would be more true.
This coming week is historically one of the worst weeks of the year for stocks. That doesn't take into consideration the odd impact of election years. We've shown this chart many times this year and we noted how weak September and October have been in the past during election years. But the chart also showed us that it tends to do better when we have an incumbent president running (green line), which we don't, but it is an odd situation where the incumbent party has a new nominee, but they didn't go through a primary process. Does it matter? Maybe, because this year is acting more like the green line, rather than the open field red line.
A close look at the green line in September and October shows that stocks hold up well and then do really well after the election in November. But, there is one little slam down at the end of October on all of the lines on this chart, including the green line, before a November rally. Is this the week?
The 30 year October chart shows the "worst week" record which turns red starting tomorrow, although a lot of those large red lines were influenced by the large losses during the 2008 bear market that took a beating in October of that year. By the way, 2008 was an election year, so...
Chart provided courtesy of www.sentimentrader.com
Admin Note: We will be working on a server and software upgrade this week that could disrupt the website periodically. The maintenance could take part or all of the website down at times hindering access, but it will not impact Premium Service email and text alerts. I'll keep you posted.
The S&P 500 (C-fund) was up nicely on Friday, pushing it back above the top of that rising wedge formation again. This could certainly breakout again and start another leg higher, but the wedge formation suggests it may not be that easy as they tend to eventually break down. So, being above the resistance is a good sign, but it's so close and trend lines aren't always perfect. It's still in the neighborhood.
DWCPF (S-fund) was also up on Friday and although it lagged on the day, it did lead last week and it is leading for the month of October with a gain of 3.2%. These charts are long term charts and you can see that no matter how you slice it, the S-fund may be above the long-term trading channel, which makes it a little vulnerable.
On the other hand, if you look at a log scale chart, or logarithmic scale, you can see the size of the moves in percentages rather than linear straight points. In other words a 100 point move in the chart is more significant when it was trading near 400 than when it trades near 2000. Anyway, there is an argument that can be made that in the log scale chart it is closer to some support than resistance. That's a more risky viewpoint, but as I said, it's arguable.
The I-fund gained 0.56% on Friday: By comparison the EFA was up 0.68%, ACWX was up 0.75%, and the "ex USA ex China ex Hong Kong Index" was up 0.44%. This guessing game for the daily I-fund price may go on through the end of the year as the TSP transitions into the new tracking index, which is supposed to eventually mimic the "ex USA ex China ex Hong Kong Index." You can see the TSP's eventual final daily price and return posted on our site each evening.
BND (bonds / F-fund) was up slightly but closed at the lows of the day on Friday. There's support near 73.75 and an open gap up near 74.60. The bond market started pricing in a Fed that is less likely to cut rates aggressively when it peaked in September. Has that now been fully priced in? Bonds and the F-fund move counter to yields.
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.html
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.
