After a wild finish to March on Thursday with stocks plummeting in that final half hour of trading, Friday the first of April saw similarly wild action, but this time the push was upward in the final 15 minutes of trading. After losing 72-points, or 1.6% on Thursday, the lame follow-through action in the S&P 500 on Friday was a troubling development, but that last 15 minutes may gave the bulls some momentum to build on for the new week. Small caps and the I-fund saw much better results as they both gained nearly 1% on the day.
[TABLE="align: center"]
[TR]
[TD="align: center"]
[/TD]
[TD]
[/TD]
[TD="width: 338, align: center"] Daily TSP Funds Return
[TABLE="align: center"]
[TR]
[TD="align: right"][/TD]
[/TR]
[/TABLE]
[/TD]
[/TR]
[/TABLE]
The S&P 500 (C-fund) was quite active on the first trading day in April, culminating with a spike higher into the close to push it into positive territory. The first few days in April have a bullish bias and historically it has typically been a month where the dips can be bought, but 2022 has not been a typical year so we can only wait and see if the seasonality calendar is a factor. The index is above most of the major moving averages giving the bulls an advantage, but I wouldn't be surprised if the bears make an attempt to push this down to test that 50-day EMA (purple) one more time, near 4455.
The weekly chart shows the slight gain last week but it closed off the highs creating a possible reversal week. A closer look in that 2nd chart shows that reversal, which you can see can be toppy for at least the short term.
DWCPF (small caps / S-fund) held above its 50-day EMA (purple) and that kept it above that parallel trading channel that it broke above last week. I didn't mark it but there is still a small open gap down near 1840.
The EFA (I-fund) had a nice day and the gain was enough to push it back above its 50-day EMA (purple.) The problem is that it backed off from the 200-day EMA (blue) last week and also fell out of the rising trading channel. There's a good sized open gap below that will always be a potential pullback target unless / until it gets filled.
BND (Bonds / F-fund) was down on Friday but it battled back from a larger early loss to move back up and it ended the week testing the top of its long-term trading channel.
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.
[TABLE="align: center"]
[TR]
[TD="align: center"]
[TD]
[/TD]
[TD="width: 338, align: center"] Daily TSP Funds Return
[TR]
[TD="align: right"][/TD]
[/TR]
[/TABLE]
[/TD]
[/TR]
[/TABLE]
We got the March jobs report on Friday which came up a little short of expectations, but the market has had more pressing issues than that, and weakness in the economic data, if nothing else, might lean the Fed to a less hawkish approach, although they know they have been behind the curve, both figuratively and literally, so they may not have many options at this point. Plus the the dip in the unemployment rate to 3.6% may actually make them more hawkish. They are in a tough spot.
With the 2-year Treasury yield closing at 2.44% on Friday, and the 10-year yield at 2.38%, we have officially had a yield curve inversion on both the daily and weekly charts.
The 10-year (top) fell below support and an old resistance line in the second half of the week, so despite being just a few days off recent highs, it does show signs of a short term peak. Meanwhile the 2-year is at its highs so it may continue to get more inverted, which isn't a good sign for the economy. The 2/10 yield curve...
As I mentioned last week however, it hasn't always been an immediate sell signal for the stock market. Over the last 30+ years, each of the prior inversions led to a push higher in stocks, and in many cases a move new highs, before they eventually rolled over leading to a more significant decline in stocks, and 4 of those 5 inversions since 1990 led to a recession.
The price of oil pulled back last week after the Biden administration opened the oil reverses to help with gasoline prices. We have an interesting situation here as we start to head into the heavier driving months of the year where we generally see higher oil prices, but the new supply and the possibility of a recession, which could stymie demand, could help keep oil prices down. You can see that the chart has been repeatedly testing that purple 50-day EMA, and if we don't see that hold, the prices could come down closer to the 80 - 85 area.
One surprising development on Friday was the nasty decline in the market leading Dow Transportation Index. A 4.7% one day loss is not typical. The rail and delivery stocks lagged on Friday. Was this due to continued supply chain issues? That would not be a good sign for the economy or the stock market.
As you'll see below, the stock charts don't look too bad as we saw some tough resistance get taken out in the recent rally, but they are still in an area that could go either way.
It's kind of a light week on the economic data front, but we do get the ISM manufacturing report on Tuesday, and the release of the Fed FOMC meeting minutes on Wednesday. Both could be the market movers this week.
With the 2-year Treasury yield closing at 2.44% on Friday, and the 10-year yield at 2.38%, we have officially had a yield curve inversion on both the daily and weekly charts.
The 10-year (top) fell below support and an old resistance line in the second half of the week, so despite being just a few days off recent highs, it does show signs of a short term peak. Meanwhile the 2-year is at its highs so it may continue to get more inverted, which isn't a good sign for the economy. The 2/10 yield curve...
As I mentioned last week however, it hasn't always been an immediate sell signal for the stock market. Over the last 30+ years, each of the prior inversions led to a push higher in stocks, and in many cases a move new highs, before they eventually rolled over leading to a more significant decline in stocks, and 4 of those 5 inversions since 1990 led to a recession.
The price of oil pulled back last week after the Biden administration opened the oil reverses to help with gasoline prices. We have an interesting situation here as we start to head into the heavier driving months of the year where we generally see higher oil prices, but the new supply and the possibility of a recession, which could stymie demand, could help keep oil prices down. You can see that the chart has been repeatedly testing that purple 50-day EMA, and if we don't see that hold, the prices could come down closer to the 80 - 85 area.
One surprising development on Friday was the nasty decline in the market leading Dow Transportation Index. A 4.7% one day loss is not typical. The rail and delivery stocks lagged on Friday. Was this due to continued supply chain issues? That would not be a good sign for the economy or the stock market.
As you'll see below, the stock charts don't look too bad as we saw some tough resistance get taken out in the recent rally, but they are still in an area that could go either way.
It's kind of a light week on the economic data front, but we do get the ISM manufacturing report on Tuesday, and the release of the Fed FOMC meeting minutes on Wednesday. Both could be the market movers this week.
The S&P 500 (C-fund) was quite active on the first trading day in April, culminating with a spike higher into the close to push it into positive territory. The first few days in April have a bullish bias and historically it has typically been a month where the dips can be bought, but 2022 has not been a typical year so we can only wait and see if the seasonality calendar is a factor. The index is above most of the major moving averages giving the bulls an advantage, but I wouldn't be surprised if the bears make an attempt to push this down to test that 50-day EMA (purple) one more time, near 4455.
The weekly chart shows the slight gain last week but it closed off the highs creating a possible reversal week. A closer look in that 2nd chart shows that reversal, which you can see can be toppy for at least the short term.
DWCPF (small caps / S-fund) held above its 50-day EMA (purple) and that kept it above that parallel trading channel that it broke above last week. I didn't mark it but there is still a small open gap down near 1840.
The EFA (I-fund) had a nice day and the gain was enough to push it back above its 50-day EMA (purple.) The problem is that it backed off from the 200-day EMA (blue) last week and also fell out of the rising trading channel. There's a good sized open gap below that will always be a potential pullback target unless / until it gets filled.
BND (Bonds / F-fund) was down on Friday but it battled back from a larger early loss to move back up and it ended the week testing the top of its long-term trading channel.
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 for reading. We'll see you back here tomorrow.
Tom Crowley
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 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.
