Stocks rode the roller coaster again yesterday as we saw more volatility complete with a lower low, a strong midday rebound, and another weak close. Some of the most beaten down tech stocks did see some buying yesterday, but again they were were taken off their best levels in those final 30 minutes of trading. By the close the small caps managed a small gain, but otherwise it was another take down of the major indices.
As we look for clues for a low, or even a playable bounce, the stock market continues to fall almost daily. For the market timer who stepped aside this month or last, they are looking for a place to jump in. Some will jump in too early, some too late, and some will get it just right, but as a market timer myself, I understand that at least you gave yourself a chance to miss out out on some of these losses.
As I have been saying, I didn't play this very well as I jumped back in - bought the dip - way too early. With those losses it may cause me to act more like a buy and holder, although I do have to decide whether to sell any relief rally, and the goal is to try to avoid losses. The only way to beat the market returns is to be out when stocks are going down.
There has always been a controversy between buy and holders and market timers with the buy and holders saying that timers are taking on too much risk or that it's not as profitable in the long-term, etc. Yes, buy and holders do very well during strong bull market, and yes, if you are wrong with timing the market when it goes up, and when it goes down, you can get beaten up. But buy and holders are at the mercy of the market, and they always take the full brunt of any market decline, that is unless they are conservative and spread out into bonds and cash as well, in which case they may not meet the stock market returns during bull markets either.
So, timers can get whipsawed and have problems, but it's no picnic for the buy and holder either. The crypto people know this next feeling very well. "HODL" is the term crypto people coined (no pun intended) to mean hold. (Thanks to the person who posted this on x.com.) But to the buy and holders out there, does this feel like your account over the last few weeks?
Anyway, there's not much to report despite the back and forth of the tariff situation which is confusing even the business community. The President did say there will be some short-term pain while we go through this, but does short-term mean a few weeks, months, or even years?
The S&P 500 (C-fund) was part of the encouraging midday rally yesterday as it erased an 85-point loss when it rallied 108-points from 1:30 to 3:00 PM ET, but it couldn't hold on into the close and that's when the sell button started to get hit again.
The daily chart shows the nasty descending channel that it has been in. It has closed below the 200-day EMA for two straight days so there's a slight glimmer of hope that the 3-to-5-day confirmation rule will save it this week. That's a lot of hope, but going straight down isn't normal. It did hit the 10% correction level at the low yesterday and sometimes that rings a bell for a relief rally as well.
The Transportation Index has been sending the warnings signs for many weeks and I watched it and posted it creating that head and shoulder pattern, wondering if it was leading the way, or leading us astray. It led. This week it broke down sharply again, this time from a bear flag.
We get the CPI (Consumer Price Index CPI) report before the opening bell today. The Fed is considering two interest rate cuts by the end of the year, but they have to be assured that inflation is not going to be impacted negatively before doing so, and this CPI data may help, so it will be an important report.
We're also awaiting a funding bill to avoid a government shutdown. As I posted the other day, the stock market tends to ignore these, probably knowing that a deal is always eventually made. The question is whether stocks will rally once a deal is made?
DWCPF (S-fund) made a slight gain on Tuesday but it was up over 1% at one point and it settled fairly close to the recent lows despite the gain.
ACWX (the I-fund tracking index) continues to hold up well considering. At some point this may react to the tariff situation here in the US, but right now it is enjoying the weakness we're seeing in the dollar.
BND (F-fund) was down sharply with yields moving higher. Today's CPI report could be a bond market mover, depending on how close that report comes to the estimates. The gap remains open and is a possible downside target. I'd say this has a bull flag look to it, but that peak is more pointed than I'd like to see in a flag formation. Is it a peak?
Thanks so much for reading! We'll see you back here tomorrow.
Tom Crowley
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
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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 may use additional methods and strategies to determine fund positions.
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As we look for clues for a low, or even a playable bounce, the stock market continues to fall almost daily. For the market timer who stepped aside this month or last, they are looking for a place to jump in. Some will jump in too early, some too late, and some will get it just right, but as a market timer myself, I understand that at least you gave yourself a chance to miss out out on some of these losses.
As I have been saying, I didn't play this very well as I jumped back in - bought the dip - way too early. With those losses it may cause me to act more like a buy and holder, although I do have to decide whether to sell any relief rally, and the goal is to try to avoid losses. The only way to beat the market returns is to be out when stocks are going down.
There has always been a controversy between buy and holders and market timers with the buy and holders saying that timers are taking on too much risk or that it's not as profitable in the long-term, etc. Yes, buy and holders do very well during strong bull market, and yes, if you are wrong with timing the market when it goes up, and when it goes down, you can get beaten up. But buy and holders are at the mercy of the market, and they always take the full brunt of any market decline, that is unless they are conservative and spread out into bonds and cash as well, in which case they may not meet the stock market returns during bull markets either.
So, timers can get whipsawed and have problems, but it's no picnic for the buy and holder either. The crypto people know this next feeling very well. "HODL" is the term crypto people coined (no pun intended) to mean hold. (Thanks to the person who posted this on x.com.) But to the buy and holders out there, does this feel like your account over the last few weeks?
Anyway, there's not much to report despite the back and forth of the tariff situation which is confusing even the business community. The President did say there will be some short-term pain while we go through this, but does short-term mean a few weeks, months, or even years?
The S&P 500 (C-fund) was part of the encouraging midday rally yesterday as it erased an 85-point loss when it rallied 108-points from 1:30 to 3:00 PM ET, but it couldn't hold on into the close and that's when the sell button started to get hit again.
The daily chart shows the nasty descending channel that it has been in. It has closed below the 200-day EMA for two straight days so there's a slight glimmer of hope that the 3-to-5-day confirmation rule will save it this week. That's a lot of hope, but going straight down isn't normal. It did hit the 10% correction level at the low yesterday and sometimes that rings a bell for a relief rally as well.
The Transportation Index has been sending the warnings signs for many weeks and I watched it and posted it creating that head and shoulder pattern, wondering if it was leading the way, or leading us astray. It led. This week it broke down sharply again, this time from a bear flag.
We get the CPI (Consumer Price Index CPI) report before the opening bell today. The Fed is considering two interest rate cuts by the end of the year, but they have to be assured that inflation is not going to be impacted negatively before doing so, and this CPI data may help, so it will be an important report.
We're also awaiting a funding bill to avoid a government shutdown. As I posted the other day, the stock market tends to ignore these, probably knowing that a deal is always eventually made. The question is whether stocks will rally once a deal is made?
DWCPF (S-fund) made a slight gain on Tuesday but it was up over 1% at one point and it settled fairly close to the recent lows despite the gain.
ACWX (the I-fund tracking index) continues to hold up well considering. At some point this may react to the tariff situation here in the US, but right now it is enjoying the weakness we're seeing in the dollar.
BND (F-fund) was down sharply with yields moving higher. Today's CPI report could be a bond market mover, depending on how close that report comes to the estimates. The gap remains open and is a possible downside target. I'd say this has a bull flag look to it, but that peak is more pointed than I'd like to see in a flag formation. Is it a peak?
Thanks so much for reading! We'll see you back here tomorrow.
Tom Crowley
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
Questions, comments, or issues with today's commentary? We can discuss it in the Forum.
Daily Market Commentary Archives
For more info our other premium services, please go here... www.tsptalk.com/premiums.php
To get weekly or daily notifications when we post new commentary, sign up HERE.
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 may use additional methods and strategies to determine fund positions.
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