tsptalk's Market Talk

[tsptalk]

When will the 10% pullback hit? It’s overdue.

??

Odds of a government shutdown at the end of the month increased this week

Congress teeters toward shutdown with Democrats vowing to oppose stopgap

Odds of a government shutdown at the end of the month increased this week as Democrats vowed to oppose a stopgap spending measure to keep the government open.

nbc16.com

I keep bringing this up. I'm not sure how we can ignore it...

https://twitter.com/x/status/1967272382218883392

 

[Zapple]

Wow. What's this guy's track record? Small caps have certainly lagged the last several years, but have been doing relatively well this year. Thanks for sharing this info. Of course, it could simply be a short(er) term trade. We're now in a historically weak seasonality time of the year. I'm very cautious in my outlook. A 10 to 20 percent pullback (or even more) would not surprise me and would set up nicely for a year end rally. Who knows?

 

[tsptalk]

That TZA trade was started on Aug 21 so it's certainly underwater right now, but being a member of the House Financial Services Committee, I would sure be interested to know if he still holds it.

 

[bmneveu]

TZA was trading between 10.22 and 10.57 on Aug 21. Yesterday it closed at 8.15. So he's down about 20% ($43K) on that trade so far, if he's still holding it.

 

[JTH]

That TZA trade was started on Aug 21 so it's certainly underwater right now, but being a member of the House Financial Services Committee, I would sure be interested to know if he still holds it.

TZA was trading between 10.22 and 10.57 on Aug 21. Yesterday it closed at 8.15. So he's down about 20% ($43K) on that trade so far, if he's still holding it.

Yes, I too was somewhat perplexed by this trade. Most of my active trading is with the leveraged ETF's, I forget the stats, but I've crunched the numbers on the TNA/TZA pair, and it's just not good. The higher the daily volatility, the faster the drag, that April correction ripped a good hole.

Based on the 21-Aug Close, TZA needs to rise 26% from last Friday to get back to break-even. That 26% level is above Standard Deviation 3-Resistance on the 63-Day Linear Regression Channel. So basically he needs R2K to go up 8.66% just to break-even.

Case in point, a sample of just how bad the Volatility Decay was for the April Correction.

• The Bullish TNA is 9.81% YTD while the Russell 2000 is 9.80% YTD
• The Bearish TZA is -37.16% YTD while the Short Russell2000 RWM is -10.25%
  • The performance between TZA/RWM is 3.63X YTD

 

[tsptalk]

Yes, good lesson - avoid holding leveraged ETFs for long periods of time. They are great if you find a strong trend or turning point, but waiting for a losing trade to get even is a tough business with these, especially 3X'ers.

 

[tsptalk]

It's a post expiration Friday and the market is looking for direction. Stocks are off to a slow start to begin the week. The major indices are mixed but mostly flat. Yields and the dollar are also flat with yields just slightly up and UUP down slightly.

Gold is up big, oil is down, and the cyptos are falling this morning.

Coming across the wire now:

St. Louis Fed President Musalem sees ‘limited room’ for more interest rate cuts

St. Louis Fed President Alberto Musalem on Monday reiterated his support for last week’s interest rate cut but said he is wary about going much further.

“I believe there is limited room for easing further without policy becoming overly accommodative, and we should tread cautiously” on further reductions, he said.

https://www.cnbc.com/2025/09/22/st-louis-fed-president-musalem-sees-limited-room-for-more-interest-rate-cuts.html

 

[bmneveu]

The RSI suggests the market is entered extreme overbought territory yesterday. The last time it did that, late July, we saw the S&P 500 top out about 4 days later and then drop about 200 points over the following 3 days.

 

[tsptalk]

Despite mixed and flat action in the big three indices, small caps are having a day and attempting to close back above the resistance of its rising trading channel.



The I-fund is also up, leading the S&P (C).

Yields and the dollar are nearly flat to start the day. Oil, gold, and bitcoin are all up this morning.

On Friday we'll get the PCE Prices and Personal Income and Spending reports, and that could shake things up, although investors are now counting on the Fed cutting rates rates regardless of the data, that is until we get the September jobs report to see where the labor market stands.

 

[tsptalk]

Stocks are relatively flat this morning, a day after the Powell's comments about stocks being highly valued. We have yields up slightly and the dollar gapped up giving the I-fund some trouble in early trading.

A lot of people have been calling for the dollar to continue to fade, but I have been seeing a chart that seems to be trying to form a bottom.



A stronger dollar could put some pressure on prices. Many price like stocks, commodities, gold, etc., but it could also help the inflation situation.

Anyway, it's a slow morning so far, but that doesn't always tell the story of how the day goes as we have seen some big reversals in afternoon trading recently.

 

[tsptalk]

Immediate test of the support line this morning.



Another PMO crossover potentially with continued divergence from S&P.

Better than expected jobless claims sending yields and the dollar higher.




The good news: Strong economic data this morning.

The bad news: Why would we need more interest rate cuts?

GDP - Third Estimate For: Q2
Actual: 3.8%
B.com Forecast: 3.3%
B.com Cons: 3.3%
Prior: 3.3%

Initial Claims For: 09/20
Actual: 218K
B.com Forecast: 240K
B.com Cons: 238K
Prior: 232K
Revised From: 231K

Durable Orders For: Aug
Actual: 2.9%
B.com Forecast: 0.5%
B.com Cons: -0.5%
Prior: -2.7%
Revised From: -2.8%

 

[tsptalk]

The PCE Prices data was basically inline with estimates and the initial reaction is relief.

PCE Prices For: Aug
Actual: 0.3%
B.com Forecast: 0.3%
B.com Cons: 0.3%
Prior: 0.2%

PCE Prices - Core For: Aug
Actual: 0.2%
B.com Forecast: 0.2%
B.com Cons: 0.2%
Prior: 0.3%

It's early and a lot is happening. We got the gap up on the data, and that was enough to fill in yesterday's gap, but it stalled near the gap fill. 6600 is tough resistance and it has paid to buy every dip on the support line recently. However, there is another PMO crossover sell signal and negative divergence.




The trend has been the bulls' friend. The dips have been shallow and buyable, but one day it won't be. What day that is is anybody's guess while the S&P remains above support. If support breaks, the bearish picture would grow more credibility.

Government shut down next week? Maybe, but the market doesn't usually care unless it needs an excuse to pull back.

 

[tsptalk]

More upside follow through in tech and the S&P 500 this morning as the Nasdaq is up nearly 1% and the S&P 0.50%. Small caps and lagging but still modestly positive as market breadth is about even when combining the NYSE and Nasdaq.



While the S&P 500 is reaching for the recent highs again...



The S-fund's DWCPF opened higher but has since backed off. It filled in its morning gap already so is now free to go either way.

The classic support held yet again.

Yields and the dollar are down again, trying to erase last week's counter moves.

Gold and bitcoin are up big, while oil is falling lower.

 

[tsptalk]

It's the final trading day of the 3rd quarter. There could be some higher volume trading with pension fund rebalancing for accounts in fixed stock / bonds allocations.

The market feels tentative. Perhaps it is the impending government shutdown, the fact that we may not get a jobs report on Friday, or just fatigue.

The S&P 500 has actually been down on the first trading day in July, August and September. A fourth in a row would seem unusual given that the first day tends to be bullish, but that's the new trend.

Small caps are rolling over after yesterday's gap filled. Watch that blue line. It has done this before but trading below that line makes it a little more vulnerable -- or a place to buy.




Yields and the dollar are down again. Oil is down and gold is up again. Bitcoin is dipping after a big rally off the recent lows.

 

[tsptalk]

Another morning that starts out slow but it has been the afternoon action that has determined the outcome. Stocks opened higher, drifted back back down. In recent weeks that just led to an afternoon rally, so anything different would be an attention grabber. Otherwise, the bulls are likely to keep control.



The 10-year Treasury Yield is up a bit while the dollar is up 0.20% and that took the I-fund from a new high, to a slight loss in early trading.



Gold and oil are down this morning while the crypto continue their recent rally.

Slow. Certainly no panic on Wall Street over the shutdown yet.

 

[tsptalk]

It's a tough market to knock and many charts are actually improving, like AI stocks, energy, and healthcare.

Overvalued? Yes. Volatility seasonality? Yes. Scary? Yes. But investors are still underwhelmed showing little excitement, and that could actually keep the rally going.

https://www.cnn.com/markets/fear-and-greed

 

[tsptalk]

Although the Dow is down, stocks opened mostly higher this morning and that means new highs for the indices, including the S-fund, which is up despite a rally in yields.




Yields and the dollar are up, and that would typically be putting some pressure on stocks, and maybe that is the case - that they could be up higher? Either that or the weight of the yields and dollar will make this morning's rally in stocks less sustainable as the day goes on.

The 10-year yield is attempting to make a higher low but may be running into the resistance of the 50-day average soon.



And the dollar is up testing its 200-day average yet again. If it keep's a knock'in someone may eventually let it in. That could be a warning for the I-fund, which has been invincible this year.

Despite the rally in the dollar, gold and bitcoin are soaring, and oil is up as well.

 

[tsptalk]

Yields are dipping a bit but the dollar is showing strength again this morning and possibly breaking out. Should this happen, it is not a deal breaker for the rally in stocks, but it could add pressure, and the I-fund may be less enthusiastic compared to US equities.



In early trading, small caps and the I-fund are feeling a little more pain compared to the US large caps.




Gold is up and topping $4000, while bitcoin is down, and oil is mostly flat.

 

[tsptalk]

In the early action on Wednesday, stocks are back into rally mode after Turnaround Tuesday turned out to be a one day wonder - at least as of 10:45 a.m. ET.

Small caps are leading the way after the loss of over 1% yesterday, and lower yields are helping.



The dollar is rising again, and topping another layer of resistance, but so far that is not putting the breaks on the I-fund which is up about 0.50% this morning. That's lagging the small caps but inline with the S&P 500's gain this morning.



Gold continues to fly with another 1.5% gain today. Bit coin is trying to bounce back from Tuesday's sell off, and the price of oil is up, but off its morning highs.

The government shutdown lingers with no ill affects to Wall Street, and perhaps ignorance is bliss as economic data is still being held back because of the shutdown.

 

[tsptalk]

Stocks have hit a resistance wall and are backing off again. Perhaps what makes this one different than other previous dips is the dollar's strength, and some weakness that we see in the credit markets (via HYG.)



The I-fund is taking the biggest hit because of the dollar. The strength in the dollar is adding to the weakness in gold, cryptos, and oil/ This was the concern about a strengthening dollar.