Stocks suffered through huge swings yesterday after the release of the Federal Reserve's interest rate hike, policy statement, and press conference. Investors interpreted the policy statement as dovish, but Jerome Powell was much more hawkish at the press conference afterwards, causing the big reversals. The Dow lost 505-points after trading in a 932 point range and giving up a 400-point gain. Yields and the dollar also flip flipped as both ended the day higher despite falling earlier in the day.
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The Fed did raise interest rates another 0.75% but left the door open for continued aggressive moves in order to keep inflation under control. They probably won't be happy until they've severely hit the economy and the stock market is acting accordingly.
The 10-year Treasury Yield moved up slightly to 4.06% but it hit a low of 3.98% just after the new policy statement was released, which was helping push stocks higher. But the rebound put it back above that rising support line with some modest resistance at yesterday's highs of 4.08%.
The dollar fell back below its 50-day EMA for the second time but surged higher after Powell's press conference so the bull flag and support remain intact. This is not a great sign for the stock market.
I posting this chart a few days ago to show what happened to the stock market after prior interest rate hikes this year. The S&P 500 was actually up during the first 4 rate hikes, and only the hike in September triggered a selloff... until yesterday. If that is any indication of what the market is going to do next, the S&P 500 made a low 16 trading days later on October 13.
I've been tracking Apple and Amazon because of their market leading abilities, but they were down 3.7% and 4.8% respectively yesterday so those charts are breaking down, and as goes Apple...
We had a good sized rally leading up to that FOMC meeting so there may be some unwinding of positions that had profits for a couple of days, although it won't be unusual to see snap back rallies as stocks rarely go straight down unless there is some kind of waterfall like decline. We haven't really seen one of those yet - that "get me out at any price" panic selling, so maybe we're due for something like that before a post election seasonal rally?
We will get the October jobs report this coming Friday. Estimates are looking for a gain of 242,000 jobs and an unemployment rate of 3.5%. With the Fed's FOMC meeting in the rearview mirror by Friday, it may not be as big of a deal since we will also get the November jobs report in early December before the next FOMC meeting on December 13 - 14.
The S&P 500 (C-fund) fell sharply after all was said and done, and the bear flag is filling on the downside right now. There is some decent looking support near 3700, but bear flags tend to break down so I don't know how much support it will be. The chart looks bad so be careful.
The DWCPF (small caps / S-fund) gave back about five and half days of gains yesterday and closed back below the 50-day EMA as it also pulls back from the top of its bear flag. There's not a lot of good to say about this chart at this point.
The EFA (I-fund) also gave back recent gains and you can see this year to date chart shows how much trouble the EFA has had once it is flirting with that overhead resistance.
BND (bonds / F-fund) also flipped over and gave back early gains after yields moved back up. The Fed is telling us that there's more to go with interest rates and that probably means higher yields and a little more pain for bonds.
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
To get weekly or daily notifications when we post new commentary, sign up HERE.
Thanks so much 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.
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The Fed did raise interest rates another 0.75% but left the door open for continued aggressive moves in order to keep inflation under control. They probably won't be happy until they've severely hit the economy and the stock market is acting accordingly.
The 10-year Treasury Yield moved up slightly to 4.06% but it hit a low of 3.98% just after the new policy statement was released, which was helping push stocks higher. But the rebound put it back above that rising support line with some modest resistance at yesterday's highs of 4.08%.
The dollar fell back below its 50-day EMA for the second time but surged higher after Powell's press conference so the bull flag and support remain intact. This is not a great sign for the stock market.
I posting this chart a few days ago to show what happened to the stock market after prior interest rate hikes this year. The S&P 500 was actually up during the first 4 rate hikes, and only the hike in September triggered a selloff... until yesterday. If that is any indication of what the market is going to do next, the S&P 500 made a low 16 trading days later on October 13.
I've been tracking Apple and Amazon because of their market leading abilities, but they were down 3.7% and 4.8% respectively yesterday so those charts are breaking down, and as goes Apple...
We had a good sized rally leading up to that FOMC meeting so there may be some unwinding of positions that had profits for a couple of days, although it won't be unusual to see snap back rallies as stocks rarely go straight down unless there is some kind of waterfall like decline. We haven't really seen one of those yet - that "get me out at any price" panic selling, so maybe we're due for something like that before a post election seasonal rally?
We will get the October jobs report this coming Friday. Estimates are looking for a gain of 242,000 jobs and an unemployment rate of 3.5%. With the Fed's FOMC meeting in the rearview mirror by Friday, it may not be as big of a deal since we will also get the November jobs report in early December before the next FOMC meeting on December 13 - 14.
The S&P 500 (C-fund) fell sharply after all was said and done, and the bear flag is filling on the downside right now. There is some decent looking support near 3700, but bear flags tend to break down so I don't know how much support it will be. The chart looks bad so be careful.
The DWCPF (small caps / S-fund) gave back about five and half days of gains yesterday and closed back below the 50-day EMA as it also pulls back from the top of its bear flag. There's not a lot of good to say about this chart at this point.
The EFA (I-fund) also gave back recent gains and you can see this year to date chart shows how much trouble the EFA has had once it is flirting with that overhead resistance.
BND (bonds / F-fund) also flipped over and gave back early gains after yields moved back up. The Fed is telling us that there's more to go with interest rates and that probably means higher yields and a little more pain for bonds.
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
To get weekly or daily notifications when we post new commentary, sign up HERE.
Thanks so much 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.
