07/17/25
Stocks were acting sluggishly early on Wednesday and turned sharply lower after a White House official reported that President Trump was going to fire Jerome Powell "soon." About a half hour later, when asked about it, Trump said that would be "highly unlikely", and stocks reversed back up and closed with solid gains. Yields and the dollar also went for a ride to complete a very volatile day.
(The most current commentary is always posted here: www.tsptalk.com/comments.php)
The PPI (Producer prices) report came in much cooler than expected, although the prior report was revised higher. Yields did fall on the favorable data but all of that was literally trumped by something more interesting.
The President gave the media something to talk about yesterday, and the stock market sure whipsawed over the conflicting comments. A White House official made public that President Trump was planning to fire Jerome Powell "soon" and Trump apparently went so far as to draft a letter of intent to do just that. Fast forward about a half hour later and Trump said in a press event that firing Powell is "highly unlikely."
Welcome to the volatility, and what I thought was most interesting was that the stock market was acting sluggish before any of this came out, but suddenly, when the rumor was refuted, investors jumped into stocks, as if something positive just happened. It was an odd day and I'm not sure I trusted the rally.
I've been quite bullish but felt we could see some backing and filling in late July or into August, but I suppose when investors are buying on a non-news event, that's what a bull market looks like. UNLESS...
Unless you want to use potentially irrational exuberance as a reason to sell. I still think we got some kind of a warning sign on Tuesday when the small caps (Russell 2000 and the S-fund's DWCPF) created a rare, and ugly, negative outside reversal day. That is when a chart makes a higher high compared to the prior day, and a lower low compared to the prior day, and it closes negative and usually below the prior day's low.
It may have been more meaningful if it happened on the S&P 500, but it was so blatant on the Russell 2000 on Tuesday that I would find it difficult to believe that it meant nothing. Ironically we had a positive reversal day on the IWM yesterday which could mean some short-term upside follow through today, but eventually we will have to deal with that more ominous chart formation.
We saw a few of these last summer, and while it doesn't always mean an immediate decline in stocks, it usually means something has changed, and we may want to be ready for a possible pullback.
As I said, it didn't occur on the S&P 500 (C-fund) this time, and yesterday we did see the S&P recover from a morning breakdown below the blue trading channel. It continues to slide sideways and I have to admit that strength in the face of bizarre news is a sign of a strong bull market. However, the PMO indicator is now below its moving average creating another potential warning sign.
The dollar was slammed after the Powell rumor and it did bounce back after it was refuted, but not all the way. That created an outside day on this chart as well but because it closed toward the middle of Tuesday's candlestick range, it wasn't considered a negative or positive reversal day. Support held on a closing basis but it did close just below the 50-day EMA, so it's just something we have to watch for the next move. Something happened yesterday, but what it means isn't exactly clear to me, but I'm leaning on the cautious side.
Yields did fall on the better than expected PPI data and of course the Fed news shook it up, but it has held at 4.5% so far. The year to date chart (top chart below) shows that yields, outside of the April tariff tantrum, have been very stable and hovering between 4.1% and 4.6% for the last six months and that has allowed the stock market, as well as businesses, to do business without concern for adjusting to wildly swinging rates.
Compare that to the post Covid yields (zoomed out 5 years) which were recovering from the 2021 - 2023 inflation and 2022 bear market. You can see how quiet they have actually been this year in comparison. So far so good but the 10-year has been rallying in July and if we start seeing 4.7% or higher, that's when the stock market could get cranky.
Earnings are starting to come in although we still have more than a couple of weeks before the bulk of the market moving Magnificent 7 start reporting. Still, beats and misses in the interim might make investor sentiment more volatile.
The DWCPF / S-fund certainly improved after the morning sell off and positive reversal yesterday - pushing it back above the resistance line, but I am still concerned that the negative outside reversal day on Tuesday has some meaning behind it.
ACWX (I-fund) got a boost from a pullback in the dollar, and it did post a positive reversal day, but this is still below that broken support line, which could act as resistance on the way back up. That wasn't the case in June, and the dollar may have peaked after yesterday's crazy day, but since the dollar's move was rumor driven, we'll see if that changes.
BND (bonds / F-fund) bounced back after testing and holding at the 50-day EMA again. It is back in the channel so there is overhead resistance again.
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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Stocks were acting sluggishly early on Wednesday and turned sharply lower after a White House official reported that President Trump was going to fire Jerome Powell "soon." About a half hour later, when asked about it, Trump said that would be "highly unlikely", and stocks reversed back up and closed with solid gains. Yields and the dollar also went for a ride to complete a very volatile day.
(The most current commentary is always posted here: www.tsptalk.com/comments.php)
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The PPI (Producer prices) report came in much cooler than expected, although the prior report was revised higher. Yields did fall on the favorable data but all of that was literally trumped by something more interesting.
The President gave the media something to talk about yesterday, and the stock market sure whipsawed over the conflicting comments. A White House official made public that President Trump was planning to fire Jerome Powell "soon" and Trump apparently went so far as to draft a letter of intent to do just that. Fast forward about a half hour later and Trump said in a press event that firing Powell is "highly unlikely."
Welcome to the volatility, and what I thought was most interesting was that the stock market was acting sluggish before any of this came out, but suddenly, when the rumor was refuted, investors jumped into stocks, as if something positive just happened. It was an odd day and I'm not sure I trusted the rally.
I've been quite bullish but felt we could see some backing and filling in late July or into August, but I suppose when investors are buying on a non-news event, that's what a bull market looks like. UNLESS...
Unless you want to use potentially irrational exuberance as a reason to sell. I still think we got some kind of a warning sign on Tuesday when the small caps (Russell 2000 and the S-fund's DWCPF) created a rare, and ugly, negative outside reversal day. That is when a chart makes a higher high compared to the prior day, and a lower low compared to the prior day, and it closes negative and usually below the prior day's low.
It may have been more meaningful if it happened on the S&P 500, but it was so blatant on the Russell 2000 on Tuesday that I would find it difficult to believe that it meant nothing. Ironically we had a positive reversal day on the IWM yesterday which could mean some short-term upside follow through today, but eventually we will have to deal with that more ominous chart formation.
We saw a few of these last summer, and while it doesn't always mean an immediate decline in stocks, it usually means something has changed, and we may want to be ready for a possible pullback.
As I said, it didn't occur on the S&P 500 (C-fund) this time, and yesterday we did see the S&P recover from a morning breakdown below the blue trading channel. It continues to slide sideways and I have to admit that strength in the face of bizarre news is a sign of a strong bull market. However, the PMO indicator is now below its moving average creating another potential warning sign.
The dollar was slammed after the Powell rumor and it did bounce back after it was refuted, but not all the way. That created an outside day on this chart as well but because it closed toward the middle of Tuesday's candlestick range, it wasn't considered a negative or positive reversal day. Support held on a closing basis but it did close just below the 50-day EMA, so it's just something we have to watch for the next move. Something happened yesterday, but what it means isn't exactly clear to me, but I'm leaning on the cautious side.
Yields did fall on the better than expected PPI data and of course the Fed news shook it up, but it has held at 4.5% so far. The year to date chart (top chart below) shows that yields, outside of the April tariff tantrum, have been very stable and hovering between 4.1% and 4.6% for the last six months and that has allowed the stock market, as well as businesses, to do business without concern for adjusting to wildly swinging rates.
Compare that to the post Covid yields (zoomed out 5 years) which were recovering from the 2021 - 2023 inflation and 2022 bear market. You can see how quiet they have actually been this year in comparison. So far so good but the 10-year has been rallying in July and if we start seeing 4.7% or higher, that's when the stock market could get cranky.
Earnings are starting to come in although we still have more than a couple of weeks before the bulk of the market moving Magnificent 7 start reporting. Still, beats and misses in the interim might make investor sentiment more volatile.
The DWCPF / S-fund certainly improved after the morning sell off and positive reversal yesterday - pushing it back above the resistance line, but I am still concerned that the negative outside reversal day on Tuesday has some meaning behind it.
ACWX (I-fund) got a boost from a pullback in the dollar, and it did post a positive reversal day, but this is still below that broken support line, which could act as resistance on the way back up. That wasn't the case in June, and the dollar may have peaked after yesterday's crazy day, but since the dollar's move was rumor driven, we'll see if that changes.
BND (bonds / F-fund) bounced back after testing and holding at the 50-day EMA again. It is back in the channel so there is overhead resistance again.
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.
