The recent action has been so tough to gauge as investors go back and forth on whether there needs to be profit taking in big tech and small caps are now a good value, to sticking with what is working with the rich (stocks) getting richer and leaving the laggards alone. Yesterday gave us neither until that final half hour of trading. This back and forth is likely leading up to a big move, but what will come out on top? Bonds fell sharply yesterday as yields spiked, and big rally in the dollar led to trouble in the I-fund.
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For most of the day yesterday the Nvidia semiconductor crowd was down, and small caps were down, and what was leading was the non-semiconductor mega-cap stocks like Apple, Amazon, Netflix, Tesla, and even FedEx. By the close however there was a late buying that took both Nvidia and the small caps off their lows of the day.
Here's the intraday chart of the S&P 500 and Nasdaq and you can see the late spike.
As I said, stocks like Apple and Amazon were doing a good job of keeping tech and the Nasdaq up, but it wasn't until Nvidia caught a bid that we saw the indices hit their highs of the day.
By the way, Nvidia was down 1.4% after hours yesterday after Micron, another semiconductor company, released their earnings and gave disappointing guidance.
There wasn't a whole lot of economic data released yesterday, and if anything the new home sales data missed estimates so I'm not sure why yields shot up. It could have been the dollar but perhaps it is a fake out because the 10-year Treasury Yield ran up to what could still be the top of a bear flag. However, the rally did push it above the descending resistance line as well as the 200-day EMA, so I'm open to the bear flag possibly breaking the wrong way, although Friday's PCE Prices inflation data should have the final say.
The dollar continues its surprising strength although something that we don't usually talk about could be at play here - the Japanese Yen has been sinking and fell to its lowest level vs. the dollar since 1986.
The Dow Transportation Index exploded higher after FedEx released earnings after the bell on Tuesday. The index closed above the 50 and 200 day averages for the first time in a while, but you can see that it failed at the descending resistance line. Where it goes from here will be key. It looks like a possible head test of a bearish head and shoulders pattern, so getting above 15,400 and 15,800 are critical for technical analysts.
Tonight's presidential debate could be meaningful for the stock market although I think most people are on one side or the other already and it won't change much, but perhaps some new economic policy proposals will be brought up and could stir up the financial markets.
We'll get the PCE Prices and Personal Income and Spending reports tomorrow. We'll also get the Chicago PMI report which was historically low last month. These could be market movers.
The S&P 500 (C-fund) has been consolidating for a few days after the recent spike higher. We saw a similar setup last month and that one ended - temporarily - with a negative outside reversal day that shook out some of the weaker holding bulls, only to begin another leg higher a week later. Is it in need of another shake out before moving higher? That sounds reasonable, but the market tends to keep us off balance so we'll have to play the guessing game.
DWCPF (S-fund) was down modestly yesterday and that was disappointing given what I talked about yesterday regarding this S-fund cueing off the regional banks because KRE did very well yesterday and DWCPF couldn't get off the canvas. It's been churning in a tight range all month so it is coiling up for some kind of a big move. Perhaps the PCE report will pop it in one direction or the other. Unfortunately we don't know what the report is going to tell us.
The EFA (I-fund) took one on the chin with the dollar gapping higher again. The I-fund chart is now looking like it could be in some trouble with that bear flag clearly forming. It could turn into a "V" bottom but it would have to start moving up fairly sharply, and fairly quickly.
BND (bonds / F-fund) pulled back sharply yesterday with that rally in yields. It added another open gap to the mix. By the way, the reason there are so many gaps on this chart is because the bond market opens and closes an hour earlier than the stock market, and BND only trades during stock market hours.
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
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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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For most of the day yesterday the Nvidia semiconductor crowd was down, and small caps were down, and what was leading was the non-semiconductor mega-cap stocks like Apple, Amazon, Netflix, Tesla, and even FedEx. By the close however there was a late buying that took both Nvidia and the small caps off their lows of the day.
Here's the intraday chart of the S&P 500 and Nasdaq and you can see the late spike.
As I said, stocks like Apple and Amazon were doing a good job of keeping tech and the Nasdaq up, but it wasn't until Nvidia caught a bid that we saw the indices hit their highs of the day.
By the way, Nvidia was down 1.4% after hours yesterday after Micron, another semiconductor company, released their earnings and gave disappointing guidance.
There wasn't a whole lot of economic data released yesterday, and if anything the new home sales data missed estimates so I'm not sure why yields shot up. It could have been the dollar but perhaps it is a fake out because the 10-year Treasury Yield ran up to what could still be the top of a bear flag. However, the rally did push it above the descending resistance line as well as the 200-day EMA, so I'm open to the bear flag possibly breaking the wrong way, although Friday's PCE Prices inflation data should have the final say.
The dollar continues its surprising strength although something that we don't usually talk about could be at play here - the Japanese Yen has been sinking and fell to its lowest level vs. the dollar since 1986.
The Dow Transportation Index exploded higher after FedEx released earnings after the bell on Tuesday. The index closed above the 50 and 200 day averages for the first time in a while, but you can see that it failed at the descending resistance line. Where it goes from here will be key. It looks like a possible head test of a bearish head and shoulders pattern, so getting above 15,400 and 15,800 are critical for technical analysts.
Tonight's presidential debate could be meaningful for the stock market although I think most people are on one side or the other already and it won't change much, but perhaps some new economic policy proposals will be brought up and could stir up the financial markets.
We'll get the PCE Prices and Personal Income and Spending reports tomorrow. We'll also get the Chicago PMI report which was historically low last month. These could be market movers.
The S&P 500 (C-fund) has been consolidating for a few days after the recent spike higher. We saw a similar setup last month and that one ended - temporarily - with a negative outside reversal day that shook out some of the weaker holding bulls, only to begin another leg higher a week later. Is it in need of another shake out before moving higher? That sounds reasonable, but the market tends to keep us off balance so we'll have to play the guessing game.
DWCPF (S-fund) was down modestly yesterday and that was disappointing given what I talked about yesterday regarding this S-fund cueing off the regional banks because KRE did very well yesterday and DWCPF couldn't get off the canvas. It's been churning in a tight range all month so it is coiling up for some kind of a big move. Perhaps the PCE report will pop it in one direction or the other. Unfortunately we don't know what the report is going to tell us.
The EFA (I-fund) took one on the chin with the dollar gapping higher again. The I-fund chart is now looking like it could be in some trouble with that bear flag clearly forming. It could turn into a "V" bottom but it would have to start moving up fairly sharply, and fairly quickly.
BND (bonds / F-fund) pulled back sharply yesterday with that rally in yields. It added another open gap to the mix. By the way, the reason there are so many gaps on this chart is because the bond market opens and closes an hour earlier than the stock market, and BND only trades during stock market hours.
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.
