tsptalk's Market Talk

[tsptalk]

With yields and the dollar down, it's interesting to see small caps getting slammed today. The action bring the bear flag into the picture again, which has been a tease for the bears. 1625 - 1600 would be a good target with a confluence of support building up, but that would only give the bear flag an opportunity to break down.

And, as TommyIV pointed out yesterday, the 200-day EMA has popped up as resistance again on the S&P 500.

The EFA / I-fund is holding up well with the dollar down.

 

[tsptalk]

A gap down for stocks this morning so now the initial battle will be between the the gap near 3800 and now 3950, which was holding as support for 4 days.

After failing at the 200-day EMA, the 100-day EMA (green) is trying to hold at today's lows, an average that has been meaningful on this chart over the last few months.

A rally up in the 10-year yield isn't helping but the 50-day EMA is trying to keep it down.

The dollar is spiking but this chart has a lot of cleaning up to do with all of those open gaps above. The I-fund may take a big hit today.

 

[tsptalk]

It's options expiration day so you never know what the big position holders will do to the indices today, but next week is a typically bullish holiday week, although as I pointed out in today's commentary, prior bear market Thanksgiving weeks were inconsistent. There's that big open gap down near 3800 that will continue to vie for attention, but we also see a possible small bull flag above what looks like an important support / resistance area of 3900. All of it is below the 200-day moving averages, simple and exponential, so this is such an interesting situation.

The yield on the 10-year and the dollar have been trending lower helping stocks to remain buoyant recently, and now there are possible bear flags on these charts. However the dollar has three large open gaps above that may want to get filled at some point, and that could put pressure on stocks if they are filled.

 

[tsptalk]

The first thing I notice this morning is the gap up in the dollar, which filled one (blue) of those three large gaps opened in November. Now there are still three open gaps but one is now below. It will be interesting to see if it reaches up more this week, or if it pullback to fill this morning's gap first.

Yields are actually down in comparison, but so far it's the dollar having the impact on stock prices and pushing them slightly lower.

 

[tsptalk]

If you missed today's commentary:

Here are some returns of the Tuesday, Wednesday, and Friday of Thanksgiving week.

In more recent years I have noticed the tendency for Friday after Thanksgiving to move in the opposite direction of Wednesday. That is what the W-F column is all about. It's the combined return of the two days. Friday is a half day of trading and when Wednesday was up, Friday has tended to be down, and if Wednesday was down, Friday tended to be a positive day. The half day on Friday last year after Thanksgiving yielded an anomalous 2.3% loss, but that can happen when trading volume is very light and some big money players push things around.


Those numbers are meaningful and I think there is something to that being that trading volume tends to be down and that's generally because traders and larger institutions aren't as active, so the action is more likely driven by the automatic money inflows from pensions, 401Ks, etc., unless there is some major market event that changes that.

 

[JTH]

Maybe it's just me, volume seemed low today /s

 

[tsptalk]

yeah, and barring any big news, it should get lighter all week.

 

[tsptalk]

The dollar is down, yields are down, and bitcoin is actually up for a change and this is helping the stock market and commodities rebound today.

Trading volume should be light today and the only possible roadblock for a pre-holiday rally is the release of the FOMC meeting minutes tomorrow.

Sent from my SM-G975U using Tapatalk

 

[Bullitt]

Always such a strange week with the half day Friday.

S&P closed above psychological 4,000 and looks like it wants to get above that 61% fib retracement at 4,006. The case could be made for an inverse H&S that began in late August.

 

[tsptalk]

It's trying to get above that 200-day EMA, but struggling to hold on.

 

[tsptalk]

A lot of flat, mixed, but quiet action here. The dollar, yields, the S&P are fairly flat, while the Dow and small caps are having a strong day. The Nasdaq large tech stocks are lagging.

It's been a good week for stocks so it's possible that we get some late profit taking before he closing bell.

Reminder that the stock market closes at 1 PM ET today.

 

[tsptalk]

I don't know if it was a post Thanksgiving weekend thing, which has a poor record, or a December 1st thing, but during the bear market of 2008, there was a big rally during Thanksgiving week, but a monster 8.9% sell-off on the Monday afterward, which happened to be December 1st. That close however, was actually the low close for that month of December before another January sell off.

 

[JTH]

I don't know if it was a post Thanksgiving weekend thing, which has a poor record, or a December 1st thing, but during the bear market of 2008, there was a big rally during Thanksgiving week, but a monster 8.9% sell-off on the Monday afterward, which happened to be December 1st. That close however, was actually the low close for that month of December before another January sell off.

Gee, what I would give to re-live that market again, only to know the outcome

 

[tsptalk]

Yields are flat but the dollar is up putting a little pressure on the market to start the week, which to start, looks like a post holiday reversal action.

Despite the weakness in the dollar, the I-fund (EFA) seems to be outperforming the US funds early on. It's not up, but it's down only about half of the S&P 500 loss.

The VIX gapped up higher this morning with a 7% gain to start the day. It had been falling for a long time.

 

[tsptalk]

Yields are up as this 10-year yield chart plays out in what looks like a bull flag, although it has been pinned below the 50-day EMA for more than a week now. Was this just a pre-holiday fake out only to bounce back after the holiday? Hard to say - end of a month, start of a new, and the final month of a bear market. There could be a lot of "play" going on as money managers pretty up their end of year reports.

The index charts are just as wishy washy. The action was poor after the post holiday reversal yesterday, but a case can be made that we are seeing some bull flags in these charts. The 200-day averages are key resistance and on the S&P 500 3900 is key support. On the S-fund chart 1635 looks like the make or break area for support.

It's tough to see but the 20-day EMA has also been holding as support on the DWCPF S-fund chart.

 

[tsptalk]

Stocks opened flat but we're starting to see a downward push about a half hour in. The Nasdaq is leading. Small caps are lagging. The dollar is down but the yield on the 10-year is up again, however still holding below the 50-day EMA.

The economic data has been showing more signs of weakness, which is what the Fed wants and he will likely address that at his speech today. At Jackson Hole he couldn't have been more hawkish. Let's see what he has to say today -- and what it does to the market.

 

[tsptalk]

A couple of thoughts after this morning's stronger than expected jobs report.

First, this throws some cold water on the premise that the Fed can stop worrying about inflation. Unfortunately, depressing the jobs market has been one of his goals and this report suggests that he has more work to do.

The market has been torn between a strong economy with a Fed trying to stop that with tightening monetary conditions, and a weak economy that will almost certainly, based on historical tendencies, see a recession because of the Fed's actions.

On the bullish side, this pullback is only testing the breakout area and it could be typical backing and filling. I would say the 4000 - 4030 area is key support that needs to hold.

 

[tsptalk]

The week starts with a rally in yields and the dollar, putting pressure on stocks and bonds.

The 10-year T-note yield is rallying back up to some potential resistance, although the open gap near 3.7%, could be an eventual target.

Small caps are lagging but remains within its recent ascending trading channel. The open gap near 1600 is still an obvious potential pullback target, but there is a lot of support between the current levels and that gap.

 

[tsptalk]

The selling resumed on Tuesday morning and we are starting to see some cracks in the charts again. The S&P 500 and Dow Transportation Index charts below show some breakdowns from rising support. Yes, often these turn into fake outs to get folks leaning the wrong way, and in the case of the Transports, the 50-day EMA may be trying to pick up the slack. The steepness of the push off the recent highs is not "flag-like" action so it is a little more alarming and it sets up more sell the rallies formations.

On Friday we get the PPI report, and next Tuesday the critical CPI report - then the Fed on Wednesday so this narrative could change quickly. However, don't forget what the effect of Powell's speech was last week... it turned a pullback into a monster rally, chased the bears out of their short position and got the bulls to jump in with both hands - only to have all flip back over and have all of these folks leaning the wrong way, which I have been stressing lately, and it happens all the time because the big money know how to play in your emotions.

 

[tsptalk]

Despite some favorable moves in the bond market with yields falling again, and the dollar down, stocks are wavering again. The Atlanta Fed's latest Q4 GDP estimate suggests the economy is trying to hold firm but this won't give the Fed any reason to back of rate hikes.