Stocks opened sharply higher on Tuesday then faded off the morning highs, and if not for a spike higher at the close, we would have had a negative reversal day. But we did see a sharp rally into the close and while the gains were quite good, it was another one of those "spinning top" indecision type of days however, as the indices closed well off the lows and off the highs of the day. Small caps had a big day.
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The action was good, thanks to the strong close, but we did get some weaker than expected housing numbers on Tuesday and housing related stocks were one of the few weak spots for a market that saw most sectors close higher. The consumer "wealth effect" is part of consumer confidence and a little dip in home prices could negatively impact that. And speaking of that, we also got a Consumer Confidence report yesterday come in at 124.1, and that was below the estimates of 131.5 and below last month's 131.4. The University of Michigan Consumer Sentiment Report comes out on Friday and it is expected to dip slightly off of last months 97.8.
Perhaps lower home prices and lower interest rates can help the housing market but we still have the issue of the inverted yield curve. It improved very slightly yesterday which could be why stocks did well, but you can see that the 3-month yield is still higher than all but the 30-year Treasury yield. That's not normal and if it continues stocks will likely buckle some as fears of a recession will escalate.
Oil closed near $60 a barrel for a gain of almost 2%, which is close to the highs of the year. While higher oil prices tends to mean the economy is strong, that's not the case this time as we see in the economic data. That means higher oil prices could negative impact consumers, as a tax might. If the economy was growing along with rising oil prices, it would not be as concerning.
The S&P 500 (C-fund) is doing all the right things right now as far as finding support at rising support lines and closing back above 2815. But 2818 is not really out of that danger zone quite yet, and may be the actually number we're looking at when looking closer at the chart. It basically closed right on the resistance line. Something tells me we are going to see some big moves again - I just wish I knew which way they were going to be. If resistance holds, it will be downward. If it holds above that 2815 (2820) level, we may shoot up toward new highs.
The longer-term chart shows the inverted head and shoulders pattern, and while the right shoulder had filled in a little, it's not quite the consolidation I would have expected. Again, you can see that the S&P closed right on that old resistance line after poking above it early yesterday, but dipped back down slightly.
The NYSE Index, which is a much broader index than the Dow and S&P 500, made it's all-time high back in January of 2018 where the S&P did it in October of 2018. It too has a bullish inverted head and shoulders pattern that could turn out to be a big bottoming pattern, but it is still in a trend of "lower highs" and it must get above 13,000, and eventually 13,250, to improve that technical roadblock.
The DWCPF (S-fund) was up handsomely yesterday but the high of the day came when it hit, and backed off slightly, from the 20-day EMA. It's above the 50 and 200 averages, which always a plus, but a move above 1400 would be a better technical move to avoid another lower high.
The EFA (I-fund) was up on the day despite a nice rally in the dollar yesterday. There's an open gap above that may need to get filled. Other than that, it is right in the middle of a long rising trading channel.
The yield on the 10-year Treasury was up early yesterday, and that helped stocks in early trading, but you can see that it closed near the lows of the day, and that was why stocks were fading during the day. I'm not sure why stocks spiked up near the close, but remember that the bond market closes an hour before the stock market, and that may have something to do with it.
The AGG (Bonds / F-fund) was up but basically flat and again, and this chart looks a little overly stretched to the upside. If it keep going up the stock market may not like it. Normally falling yields make stocks more attractive, but right now falling yields (higher bond prices) are compounding the inverted yield curve issue.
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
Thanks for reading. We'll see you back here tomorrow.
Tom Crowley
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 use additional methods and strategies to determine fund positions.
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The action was good, thanks to the strong close, but we did get some weaker than expected housing numbers on Tuesday and housing related stocks were one of the few weak spots for a market that saw most sectors close higher. The consumer "wealth effect" is part of consumer confidence and a little dip in home prices could negatively impact that. And speaking of that, we also got a Consumer Confidence report yesterday come in at 124.1, and that was below the estimates of 131.5 and below last month's 131.4. The University of Michigan Consumer Sentiment Report comes out on Friday and it is expected to dip slightly off of last months 97.8.
Perhaps lower home prices and lower interest rates can help the housing market but we still have the issue of the inverted yield curve. It improved very slightly yesterday which could be why stocks did well, but you can see that the 3-month yield is still higher than all but the 30-year Treasury yield. That's not normal and if it continues stocks will likely buckle some as fears of a recession will escalate.
Oil closed near $60 a barrel for a gain of almost 2%, which is close to the highs of the year. While higher oil prices tends to mean the economy is strong, that's not the case this time as we see in the economic data. That means higher oil prices could negative impact consumers, as a tax might. If the economy was growing along with rising oil prices, it would not be as concerning.
The S&P 500 (C-fund) is doing all the right things right now as far as finding support at rising support lines and closing back above 2815. But 2818 is not really out of that danger zone quite yet, and may be the actually number we're looking at when looking closer at the chart. It basically closed right on the resistance line. Something tells me we are going to see some big moves again - I just wish I knew which way they were going to be. If resistance holds, it will be downward. If it holds above that 2815 (2820) level, we may shoot up toward new highs.
The longer-term chart shows the inverted head and shoulders pattern, and while the right shoulder had filled in a little, it's not quite the consolidation I would have expected. Again, you can see that the S&P closed right on that old resistance line after poking above it early yesterday, but dipped back down slightly.
The NYSE Index, which is a much broader index than the Dow and S&P 500, made it's all-time high back in January of 2018 where the S&P did it in October of 2018. It too has a bullish inverted head and shoulders pattern that could turn out to be a big bottoming pattern, but it is still in a trend of "lower highs" and it must get above 13,000, and eventually 13,250, to improve that technical roadblock.
The DWCPF (S-fund) was up handsomely yesterday but the high of the day came when it hit, and backed off slightly, from the 20-day EMA. It's above the 50 and 200 averages, which always a plus, but a move above 1400 would be a better technical move to avoid another lower high.
The EFA (I-fund) was up on the day despite a nice rally in the dollar yesterday. There's an open gap above that may need to get filled. Other than that, it is right in the middle of a long rising trading channel.
The yield on the 10-year Treasury was up early yesterday, and that helped stocks in early trading, but you can see that it closed near the lows of the day, and that was why stocks were fading during the day. I'm not sure why stocks spiked up near the close, but remember that the bond market closes an hour before the stock market, and that may have something to do with it.
The AGG (Bonds / F-fund) was up but basically flat and again, and this chart looks a little overly stretched to the upside. If it keep going up the stock market may not like it. Normally falling yields make stocks more attractive, but right now falling yields (higher bond prices) are compounding the inverted yield curve issue.
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
Thanks for reading. We'll see you back here tomorrow.
Tom Crowley
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 use additional methods and strategies to determine fund positions.
