tsptalk's Market Talk

[tsptalk]

The first thing I notice this morning is that yields and the dollar are down so there should be some wind at the backs of the stock market.

Key test of support for the major 2022 stock market catalysts.

 

[tsptalk]

A stronger than expected GDP report triggered an initial rally in yields and the dollar, bit have come down off their highs and the 10-year is is actually down slightly. The GDP was mixed because of comments from Paul Ashworth, chief North America economist at Capital Economics...

“Overall, while the 2.6% rebound in the third quarter more than reversed the decline in the first half of the year, we don’t expect this strength to be sustained,” wrote Paul Ashworth, chief North America economist at Capital Economics. “Exports will soon fade and domestic demand is getting crushed under the weight of higher interest rates. We expect the economy to enter a mild recession in the first half of next year.”

Stocks were up on the news, but was it the strong growth number or the warning of a recession? The economically sensitive Dow Transports is up over 1% and leaving its bear flag and an open gap behind for another day possibly negating that negative looking flag.

 

[tsptalk]

Apple and Amazon are down sharply today, backing away from resistance. Is this a clue that someone has leaked the earnings reports set to be released after the bell, or is this the big money's way of getting investors leaning the wrong way? I always vote for trickery.

The fact that stocks are holding up at all (Dow up 300) is impressive given Facebook is down 24% !!

The Transports have given up their earlier 1% gain, and I think it has to hold that 13250 area - or else!

 

[tsptalk]

The dollar is climbing back above its 50-day EMA -- is the downside done or just filling gaps?

 

[tsptalk]

Amazon is getting slammed after hours after an earnings miss and guidance problems. It's down 19% and the futures are getting hit as well.

Apple reports in about 10 minutes. Can it save the bear market rally?

 

[tsptalk]

Yields up. The dollar is up. Stocks are up. OK, I give up. What's the answer?

 

[Bullitt]

MACD crossed above zero line just as SP500 crossed over the 50DMA so maybe there's more upside coming. Looks like the market is thinking things are so bad now they can't get much worse. Last time everyone thought that was September to October 2008 when banks numbers were so bad everyone thought the bottom had to be in. Banks earnings continued to get worse though, a lot worse.

 

[cedarpine]

Here is one of the answers explaining the market rallying yesterday: “In this case, it originally had to do with the fact that many mutual funds close their annual books at the end of October. So, even though they might have sold earlier in the month when the market was taking its “usual” October beating, they bought at the end of the month to avoid showing too much cash on their balance sheets at their fiscal year-end.”

The seasonal trade strategy is from 27 Oct to 2 Nov. So the upside might last until the Fed announcement…


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[tsptalk]

Some backing and filling to start the new week after last week's big gains.

This is from Monday's Market Commentary regarding interest rate hikes and the S&P 500 this year::

"This chart shows the 2022 year to date S&P 500 with the Federal Reserves interest rate hikes noted by the blue arrows. As we might expect, it almost always triggered a big day in one direction or the other, or both, but unfortunately there was no real consistency on which way stocks went from there. In March and July we saw big rallies afterward. In May and September stocks went straight down."

 

[tsptalk]

Yields are up again and that could hold back any big move to the upside in stocks, but look at the dollar again. It is flying up to the top of that bullish looking flag, although the top of that open gap could act as resistance. But if it gets above that gap, bull flags tend to break to the upside, and the market may not like that.

 

[tsptalk]

Yields and the dollar were both down sharply to start the day, and many charts are reversing yesterday's action to start the new month. New month, new money, new direction? Well, the direction looks the same as October's so far, but the 2-day Fed meeting starts today with a policy decision on rates coming tomorrow at 2 PM ET.

There was some news out of China regarding a new reopening committee that is being given credit for this morning's strong open, but obviously the Fed is more important right now and there will be jockeying for position in front of tomorrow's announcement.

The action looks strong but so far that 3900 area on the S&P continues to hold. Small caps are showing more strength again with the hopes of a Fed slow down in rate hikes.

 

[tsptalk]

A close below 13,400 in the Transports probably puts the bear flag back in play.

 

[tsptalk]

The 10-year yield and the dollar are down to start the day, retracing some of yesterday's positive retracement, if you will.

Stocks are off slightly and the set up looks bearish heading into the Fed meeting, but we know that it's never that easy. A word or two from the Fed today that turns them more dovish or less hawkish on rates and we could see a big rally. I have my money looking for more selling but I have been doing this long enough to know that you can't rule out the unexpected. With the election next week there are consequences to monetary actions and you never know what's being talked about inside the beltway this week. Congress has been opening criticizing Powell's hawkishness, but he didn't flinch when Trump was doing it during his term, so we'll just have to see what he says.

The ADP employment report looked strong this morning with more jobs and higher wages being reported, and that is not what the Fed wants to hear. Inflation can be very sticky and Powell knows that pausing could delay improvements or even take away what he's already done, but no action is needed for them to just say the right word or two to get the bulls excited.

Small caps are lagging this morning after leading large caps yesterday.

 

[tsptalk]

Big swings post Fed. In literally seconds at around 2:40 while Powell was speaking, I saw the S&P futures go from +34 to -12. Now back to +15 and moving fast.

 

[tsptalk]

After a gap down and a breakdown, the indices are trying to back and fill those gaps, but the bears won't be far away to sell again once they are filled or nearly filled.

Same for the 10-year yield and dollar. Gaps up are trying to get filled but it looks like they are both pushing toward the previous highs again.

 

[tsptalk]

From today's commentary: 3700 looked to be a key level.

So far it has been holding, but it's early...

 

[tsptalk]

Wow, Apple is now below 140 and Amazon below 90!

Apple and Amazon are down sharply today, backing away from resistance. Is this a clue that someone has leaked the earnings reports set to be released after the bell, or is this the big money's way of getting investors leaning the wrong way? I always vote for trickery.

The fact that stocks are holding up at all (Dow up 300) is impressive given Facebook is down 24% !!

 

[tsptalk]

A big sell off in the dollar on the rise in unemployment fills one gap while opening another. Another test of the lower end of the bear flag, or is this just filling the gap?

That is causing prices to rise across the board - stocks, metals, bitcoin, oil, nat gas, etc.

 

[tsptalk]

A close below 3700 today would be alarming. It would make a negative outside reversal day and push it below the bear flag support.

 

[TommyIV]

The S&P 500 (C-fund) and especially the DWCPF (S-fund) have given up early gains from this morning, yet the ETF EFA (I-fund) is still holding onto its gains of over 3% today. Is that because EFA (I-fund) has a greater tie to China's news of its plans to ease Covid restrictions or do you see another reason for its outperformance today?