Stocks fell sharply yesterday so once again there was no Turnaround Tuesday for the market, and another Monday rally gets sold. The Dow lost 388-points which was just slightly off the lows, and the S&P 500 held at its 200-day EMA, but that's about the only positives to mention after another September sell off. Bond yields, the dollar, and oil were all up on the day keeping the headwinds howling in front of the stock market.
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It was pretty ugly out there yesterday, especially on the NYSE where there were 5.5 stocks down for everyone up, and share volume was 7 to 1 in favor of declining volume over advancing. The Nasdaq wasn't quite as bad but it was a sea of red as well. New lows are dominating the new highs.
2023 has been been a rough market for many market timers and technicians, including me, despite the nice swings in the charts. Things that would normally work on the charts and indicators, are just not working. When nothing is working you have to wonder if there is something else brewing aside from the information that we all see and read about each day.
The potential for a government shutdown is starting to get more intense coverage but the recent market weakness is probably due to the prospects of a potential shutdown since historically the market has done a pretty good job of shaking those off. So what's brewing?
At this point the question probably isn't whether we will get a snap back rally -- we will. As always, stocks tend to go up and down further than we think is reasonable. So this downside could go longer than we think, but perhaps a snap back rally will also be bigger than we expect. The question is, whether it would need to be sold or held into the normally strong 4th quarter.
I posted this yesterday in the Plus area -- something I found on X (aka Twitter.)
"The last three times the S&P 500 was down at least 1% in both Aug and Sept?
October was up 8.0% in '22, 8.3% in '15, and 10.8% in '11.
Higher 9 of the past 10 times going back to the late '50s."
The 10-year Treasury Yield dipped early yesterday to fill in a small open gap but then reversed and rallied into the close and closed at another new high. It is up against resistance but that resistance is moving up slightly each day
The dollar is also pushing its upper resistance making new highs almost daily, and it has been too much for the stock market
Looking at the charts, technical analysis seems to be getting swept under the rug. We did have some head and shoulders patterns break down, as they tend to do, but I was on the optimistic side that they are considered continuation patterns, and sometimes the necklines hold on pullbacks. Nope! Not this time.
We saw bullish inverted head and shoulders on some charts, but they broke down as well. The S&P 500 had a good looking bull flag in late August and into September but it also broke down, positive reversals failed, so it didn't seem to matter. Bullish, bearish, neutral, they all were breaking down in September.
While we're talking about it, I'll post the chart here. The S&P 500 (C-fund) fell down to the 200-day EMA yesterday after breaking down from its head and shoulders pattern, which could have held in the 4350 area near the neckline, but didn't. The bull flag in blue was looking promising as the right shoulder of the H&S pattern formed, but that failed as well. Now the 200-day EMA is being tested and there is an open gap about 45 points below yesterday's close.
The longer term chart shows more support near the 200-day EMA as the rising support line off the October lows gets tested. The 200-day EMA didn't hold very well earlier this year but that was when the chart was coming off the 2022 bear market, where it spent a lot of time below the 200-EMA.
On Friday we'll get key inflation data in the PCE and Personal Spending reports.
DWCPF (S-fund) has been cutting through support levels like a hot knife through butter. Now it is facing the open gap from early June and gaps either get filled and act as support, or they can get jumped and we see a gap down open below that 1660 area. The open gap up near 1735 has been completely ignored, but it would be a good level for a snap back rally to tag as the 200-day EMA is right on top of it.
The EFA (I-fund) is in the midst of filling its gap from way back in March so this one is getting hammered, and the relentlessly strong dollar continues to put the pressure on overseas markets. The chart shows some reasons to bounce here near 69.50, so we may find out pretty quickly how bad things really are - or aren't.
BND (bonds / F-fund) has been so much weaker than most expected, and that isn't unusual. The time to buy things are when there is blood in the streets and we may be seeing some trickles of blood in the gutter right now in the bond market. Support is nearby, but it is descending support at the moment.
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 pretty ugly out there yesterday, especially on the NYSE where there were 5.5 stocks down for everyone up, and share volume was 7 to 1 in favor of declining volume over advancing. The Nasdaq wasn't quite as bad but it was a sea of red as well. New lows are dominating the new highs.
2023 has been been a rough market for many market timers and technicians, including me, despite the nice swings in the charts. Things that would normally work on the charts and indicators, are just not working. When nothing is working you have to wonder if there is something else brewing aside from the information that we all see and read about each day.
The potential for a government shutdown is starting to get more intense coverage but the recent market weakness is probably due to the prospects of a potential shutdown since historically the market has done a pretty good job of shaking those off. So what's brewing?
At this point the question probably isn't whether we will get a snap back rally -- we will. As always, stocks tend to go up and down further than we think is reasonable. So this downside could go longer than we think, but perhaps a snap back rally will also be bigger than we expect. The question is, whether it would need to be sold or held into the normally strong 4th quarter.
I posted this yesterday in the Plus area -- something I found on X (aka Twitter.)
"The last three times the S&P 500 was down at least 1% in both Aug and Sept?
October was up 8.0% in '22, 8.3% in '15, and 10.8% in '11.
Higher 9 of the past 10 times going back to the late '50s."
The 10-year Treasury Yield dipped early yesterday to fill in a small open gap but then reversed and rallied into the close and closed at another new high. It is up against resistance but that resistance is moving up slightly each day
The dollar is also pushing its upper resistance making new highs almost daily, and it has been too much for the stock market
Looking at the charts, technical analysis seems to be getting swept under the rug. We did have some head and shoulders patterns break down, as they tend to do, but I was on the optimistic side that they are considered continuation patterns, and sometimes the necklines hold on pullbacks. Nope! Not this time.
We saw bullish inverted head and shoulders on some charts, but they broke down as well. The S&P 500 had a good looking bull flag in late August and into September but it also broke down, positive reversals failed, so it didn't seem to matter. Bullish, bearish, neutral, they all were breaking down in September.
While we're talking about it, I'll post the chart here. The S&P 500 (C-fund) fell down to the 200-day EMA yesterday after breaking down from its head and shoulders pattern, which could have held in the 4350 area near the neckline, but didn't. The bull flag in blue was looking promising as the right shoulder of the H&S pattern formed, but that failed as well. Now the 200-day EMA is being tested and there is an open gap about 45 points below yesterday's close.
The longer term chart shows more support near the 200-day EMA as the rising support line off the October lows gets tested. The 200-day EMA didn't hold very well earlier this year but that was when the chart was coming off the 2022 bear market, where it spent a lot of time below the 200-EMA.
On Friday we'll get key inflation data in the PCE and Personal Spending reports.
DWCPF (S-fund) has been cutting through support levels like a hot knife through butter. Now it is facing the open gap from early June and gaps either get filled and act as support, or they can get jumped and we see a gap down open below that 1660 area. The open gap up near 1735 has been completely ignored, but it would be a good level for a snap back rally to tag as the 200-day EMA is right on top of it.
The EFA (I-fund) is in the midst of filling its gap from way back in March so this one is getting hammered, and the relentlessly strong dollar continues to put the pressure on overseas markets. The chart shows some reasons to bounce here near 69.50, so we may find out pretty quickly how bad things really are - or aren't.
BND (bonds / F-fund) has been so much weaker than most expected, and that isn't unusual. The time to buy things are when there is blood in the streets and we may be seeing some trickles of blood in the gutter right now in the bond market. Support is nearby, but it is descending support at the moment.
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.
