Stocks were down on Wednesday after the PCE Prices report showed some sticky inflation data. So much for the positive seasonality before Thanksgiving, but there is some good seasonality news as we'll discuss. The I-fund had a rare outperformance as the dollar fell sharply, potentially breaking its strong uptrend, which would be good news for the I-fund. Bonds rallied as yields dropped. Yields and the dollar falling after the PCE report seems counterintuitive.
I've talked about the historically positive seasonality surrounding Thanksgiving, where both Wednesday and Friday have positive averages in the S&P 500 going back to 1988.
It's too late to do anything about it, but here's some interesting facts:
4 of the last 6 Fridays after Thanksgiving, and 9 of the last 15, have been negative including a 2.27% loss in 2021, and that has pushed that average return down quite a bit in recent years for that day.
The 21 post T-day Fridays from 1988 to 2008 had an average return of +0.31% with 13 of the 21 being positive, so there has been a more negative shift in more recent years.
There is some good news. Since 1988 there have been 11 negative Wednesdays before Thanksgiving and the record on Friday after those negative Wednesdays is 9 positive days and only 2 down for the S&P 500.
If we throw out the stats we're down to a 50/50 coin flip -- stocks will either be positive, or negative, on Friday.
We got PCE Prices inflation report on Wednesday and it caused some concerns. It was inline with expectations but as you can see the Core PCE inflation has been curling up in recent months, and it hadn't even fallen back to the "normal" levels before doing so.
This of course is concerning because inflation is not something we want to revisit, but also the stock market has been aggressively pricing in multiple Fed interest rate cuts, and those cuts could cease if the data continues to come in warm.
The S&P 500 (C-fund) made a new high last week so it's tough to complain, but there have been some noticeable negative divergences in some of the indicators showing possibly weakness under the surface for large caps.
The MACD Histogram (moving average convergence divergence) had a similar negative divergence in October before that pullback.
DWCPF (S-fund) has a similar negative divergence in the MACD but the PMO momentum indicator looks better. After prior sharp rallies we've seen some sideways consolidations (orange arrows), but one pullback earlier this month. It wouldn't be surprising to see one of these happen here, but which one?
If we look at the big techs of the Nasdaq 100 we can see that this index did not make a new high like the two charts above, and that's holding the S&P 500 (C-fund) back a little and allowing small caps to catch up. Because of that, the indicators are not showing negative divergences, but rather consistency on the weak side for tech.
The stock market closes at 1 PM ET today, but the TSP deadline is not impacted. It is still noon ET.
ACWX was up 0.45% on Wednesday but the TSP only gave the I-fund a gain of 0.16%. I give up. I can't find anything worth following that the I-fund is tracking. But we do know when the dollar is down, the I-fund does a lot better than when the dollar is strong.
You can see the updated I-fund and other TSP share prices and returns posted by about 8:30 PM ET daily here: https://www.tsptalk.com/tsp_share_prices.php
BND (bonds / F-fund) had another good day as yields are now starting to trend a little lower, although I still think the 10-year yield could now be trading in a range, rather than trending. It is currently 4.24% and there is some support near 4.15%. But clearly the downtrend in the F-fund has been broken.
Thanks so much for reading! Have a great weekend!
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.
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I've talked about the historically positive seasonality surrounding Thanksgiving, where both Wednesday and Friday have positive averages in the S&P 500 going back to 1988.
It's too late to do anything about it, but here's some interesting facts:
4 of the last 6 Fridays after Thanksgiving, and 9 of the last 15, have been negative including a 2.27% loss in 2021, and that has pushed that average return down quite a bit in recent years for that day.
The 21 post T-day Fridays from 1988 to 2008 had an average return of +0.31% with 13 of the 21 being positive, so there has been a more negative shift in more recent years.
There is some good news. Since 1988 there have been 11 negative Wednesdays before Thanksgiving and the record on Friday after those negative Wednesdays is 9 positive days and only 2 down for the S&P 500.
If we throw out the stats we're down to a 50/50 coin flip -- stocks will either be positive, or negative, on Friday.
We got PCE Prices inflation report on Wednesday and it caused some concerns. It was inline with expectations but as you can see the Core PCE inflation has been curling up in recent months, and it hadn't even fallen back to the "normal" levels before doing so.
This of course is concerning because inflation is not something we want to revisit, but also the stock market has been aggressively pricing in multiple Fed interest rate cuts, and those cuts could cease if the data continues to come in warm.
The S&P 500 (C-fund) made a new high last week so it's tough to complain, but there have been some noticeable negative divergences in some of the indicators showing possibly weakness under the surface for large caps.
The MACD Histogram (moving average convergence divergence) had a similar negative divergence in October before that pullback.
DWCPF (S-fund) has a similar negative divergence in the MACD but the PMO momentum indicator looks better. After prior sharp rallies we've seen some sideways consolidations (orange arrows), but one pullback earlier this month. It wouldn't be surprising to see one of these happen here, but which one?
If we look at the big techs of the Nasdaq 100 we can see that this index did not make a new high like the two charts above, and that's holding the S&P 500 (C-fund) back a little and allowing small caps to catch up. Because of that, the indicators are not showing negative divergences, but rather consistency on the weak side for tech.
The stock market closes at 1 PM ET today, but the TSP deadline is not impacted. It is still noon ET.
ACWX was up 0.45% on Wednesday but the TSP only gave the I-fund a gain of 0.16%. I give up. I can't find anything worth following that the I-fund is tracking. But we do know when the dollar is down, the I-fund does a lot better than when the dollar is strong.
You can see the updated I-fund and other TSP share prices and returns posted by about 8:30 PM ET daily here: https://www.tsptalk.com/tsp_share_prices.php
BND (bonds / F-fund) had another good day as yields are now starting to trend a little lower, although I still think the 10-year yield could now be trading in a range, rather than trending. It is currently 4.24% and there is some support near 4.15%. But clearly the downtrend in the F-fund has been broken.
Thanks so much for reading! Have a great weekend!
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.
