tsptalk's Market Talk

[tsptalk]

Ironically, Nvidia has nothing to do with interest rates except perhaps make the Fed's decision tougher if their report sends the S&P to all time highs. Cutting rates with stocks soaring, during an election year may not look right.

It makes me think Friday's PCE report might conveniently come in a little hot, if stocks are at new highs on Friday.

Am I jaded, or what?

 

[tsptalk]

I wrote today's commentary last night and I just had a hunch that this was going to be one of those drop and pop moves - mostly in Nvidia and maybe not the market, but so far it's the other way around although Nvidia is not down the 8% is was last light in after hours trading.

We had two strong economic reports this morning, pushing yields and the dollar up and bucking the recent trend. Now that the 800K negative jobs revisions are out of the way they can probably go back to feeding us good data. It's tough to know what to believe.

GDP came in at +3% - so far from a recession that's it's silly to even talk about one, yet the yield curve is still inverted (for over 2 years) and the Fed wants to cut rates because of economic / labor market concerns.

This is still a decent seasonal period for stocks until about a week into September, although election years tend to be worse than a normal year.

The August seasonality chart from sentimentrader.com, which is 30 years of data, does show an odd positive day today (the 29th), but tomorrow it looks like a possible give back day. We'll see. This one is not election year adjusted - just all years.

Chart provided courtesy of www.sentimentrader.com

 

[tsptalk]

Just filling some gaps? The S&P has a bullish looking flag but the double top near the open gap is still resistance.

 

[tsptalk]

We had another favorable inflation report this morning, and I expect most economic data for the next few months will have a Goldilocks feel because of the election, However, that contradicts historical seasonality tendencies for election years in Septembers, so well see. The next major data will be the August jobs report next Friday.

This is the week before a holiday and we've talked about the propensity for pre-holiday reversals. Stocks have been fairly flat this week so we're not seeing much of a reversal, but it is a change from the very bullish trend the market had been in, so if that trend resumes after the holiday weekend, perhaps the rally will resume next week?

As I said, the data has been good from all aspects - employment, economy, inflation, and that might make it tougher for the Fed to go 0.50% on the rate cut later this month. Is that positive or negative for the stock market after pricing in these cuts basically all year?

Stocks are rallying again this morning, but after yesterday's midday negative reversal, we count on this holding, although it is a Friday before a long holiday weekend so typically the bulls have an edge.

Gold, oil, and crypto are down as the dollar continues its rebound.

 

[tsptalk]

Slow weekend for the forum. That's good. Enjoy the holiday. I'm busy too. I'll be on the road today and will check in this evening. :1244::1244::1244:

 

[nasa1974]

Slow weekend for the forum. That's good. Enjoy the holiday. I'm busy too. I'll be on the road today and will check in this evening. :1244::1244::1244:

Drive safe.

 

[tsptalk]

September gets off to a bad start, but obviously this (S&P down 65-points) is not a seasonality issue. But as I talked about in today's commentary, Friday's huge rally into the close, on the last day of the month, was very suspicious - one f those pre-holiday reversals. With the three day weekend coming up, most Wall Street trading pros were long gone for the day so someone was able to push the indices.

Now, Friday's gains are gone already, although it is early and we have seen a lot of afternoon reversals so nothing would surprise me.

Bond yields are down sharply so Friday's (and last week's) pre-holiday rally in yields may be reversing back after the holiday.

The dollar is flat, oil is down big, gold and silver are down, and bitcoin is flat but always volatile.

 

[tsptalk]

 

[tsptalk]

The S&P 500 is chopping above and below the flatline in the first 30+ minutes of trading. Some comments from Atlanta Fed member Bostic about cutting before inflation hits 2% just gave stocks a reason to move up, but it could be a fleeting reaction.

Yields are down again and the F-fund (BND) just made a new high, as it tries to break out of that cup and handle formation.

Small caps and tech stocks are lagging as the S-fund fell below its 50-day EMA to start the day.

The market leading Dow Transports are up and sending a positive divergence as it has not broken down like the other indices.

The dollar is down stabilizing oil a bit, but it is now below $70. Gold and silver are up and bitcoin is down sharply.

 

[tsptalk]

Stocks are up early and yields and the dollar are down in trading before tomorrow's big jobs report. It seems like every economic report lately is being called the most important report in decades, but with a lot on the line, maybe this is big.

The weekly initial jobless claims were better than expected but yields and the dollar both gapped open on the downside again because of the weak ADP jobs data, although they have since crawled back to come off their lows.

Stocks are also off their opening lows so someone is buying, but while the S&P and other indices trade within yesterday's range, it doesn't really mean much. It's just a wait and see look right now.

Bonds are making new highs in early trading.

 

[tsptalk]

Combining two posts from other threads for jobs report / interest rate context.

Also, more large downward revision for prior months. June's number has gone from +206,000, to 179,000, now to 118,000. July went from +114,000 to +89,000. :suspicious:

August payrolls grew by a less-than-expected 142,000, but unemployment rate ticked down to 4.2%

Nonfarm payrolls expanded by 142,000 during the month, up from 89,000 in July and below the 161,000 consensus forecast from Dow Jones, according to a report Friday from the Labor Department’s Bureau of Labor Statistics.

At the same time, the unemployment rate ticked down to 4.2%, as expected.

While the August numbers were close to expectations, the previous two months saw substantial downward revisions. The BLS cut July’s total by 25,000 from +114,000 to
+89,000, while June fell to 118,000, a downward revision of 61,000.

Jobs report August 2024:

For tomorrow, Goldman's unemp rate vs rate cut matrix:

4.19% or lower = 25 bp cut as long as payrolls is positive

4.20-4.29% = 25 bp cut if payrolls is above 150k, 50bp cut if payrolls is below 150k

4.30% or higher = 50bp cut

Source: https://x.com/zerohedge/status/1831724297280250107?t=xaM5gj0GrQ3Z0a0jNYsmwQ&s=19

Interesting - the 10-year yield dropped on the release of the report, then popped right back after successfully testing the August low.

I think the bond market has concluded that we're getting a 0.25% interest rate cut, and not 0.50%. Although the odds of 0.50% went up by 7% from 40% chance to 47% chance at the CME Group. :scratchchin:

 

[tsptalk]

Yields are now falling, which sounds more like it, and the 2 / 10 year yield curve just un-inverted.

 

[tsptalk]

Back down testing the lows...

From today's commentary...

The 10-year Treasury Yield was lower on the weak data, and it is nearing the August lows. At this point I think a break below that low will be telling us that the bond market is in the recession camp. A bounce here and perhaps an economic soft landing is still in play.

 

[tsptalk]

 

[tsptalk]

The stock market opened higher and 10+ minutes in we see some decent gains, but I doubt the bears will let it be that easy for the bulls to turn this around today. Yields are moving up but the yield curve is steepening and the 2, 10, and 30 year bonds are no longer inverted - at least right now.

It's early and that's my first thought. Stocks may close higher, but I think at some point today the bears will show up again because it's not usually this easy after a beating like we saw last week.

 

[tsptalk]

Stocks opened higher but we see some selling pressure in some of the broader indices since the opening bell as investors digest Monday's big rally. The Nasdaq is clinging to small gain.

The I-fund and small caps are lagging in early trading as the dollar rises to a 4-week high.

Oil is down 2.5% to 67.17 / barrel. Gold is up slightly while silver is down and volatile bitcoin is down after yesterday's big rally.

 

[tsptalk]

Stocks opened lower after last night's debate and the CPI report was released this morning. The S&P 500 is churning near the recent lows and the key support levels between 5350 and about 5400.

Small caps are down sharply as well despite another push lower in yields. Despite evidence that inflation continues to behave, investors are growing more concerned with economic growth and small caps would be more impacted, and while lower interest rates from the Fed should eventually help them, the more volatile and less financially stable smaller companies are a risk if the economy falters.

Bonds (F-fund) are up with the 10-year yield making new lows and the 2/10 year yield curve continues to steepen, which tends to happen when the Fed cuts interest rates.

 

[tsptalk]

A positive open faded quickly but the action is very slow compared to Wednesday's extremely volatile reversal.

Economic data was OK, mostly in line with estimates in both the PPI although the Core PPI was slightly higher than expected.

Bonds are down slightly, as are stocks, but what we see now has not typically been what we see into the close.

Japan was up 3.4% last night. Gold, oil, and bitcoin are all up this morning, and the dollar is down modestly. Gold is at an all time high.

Just a few more trading days to position yourself for next Wednesday's expected rate cut. 0.25% seems to be the consensus, but there's an outside change of 0.50%.

 

[JTH]

A positive open faded quickly but the action is very slow compared to Wednesday's extremely volatile reversal.

Economic data was OK, mostly in line with estimates in both the PPI although the Core PPI was slightly higher than expected.

Bonds are down slightly, as are stocks, but what we see now has not typically been what we see into the close.

Japan was up 3.4% last night. Gold, oil, and bitcoin are all up this morning, and the dollar is down modestly. Gold is at an all time high.

Just a few more trading days to position yourself for next Wednesday's expected rate cut. 0.25% seems to be the consensus, but there's an outside change of 0.50%.

I'm thinking the last meeting led us into the near-correction, so I wonder what happens if we float up into the meeting... :hitwithrock:

 

[tsptalk]

Was it the PPI yesterday, the jobless claims, or something else, but there is now a 47% change of a 0.50% rate cut next week.

Just Thursday I posted this chart in my commentary and it was only a 15% chance.

Anyway, stocks are up again trying to make it a clean sweep for the bulls this week. Small caps are trying to take the lead again after a little outperformance yesterday.

Bonds are up as yields slip again. Gold and oil are up again after a gap down in the dollar.