The post holiday action was quite mixed with the Dow down over 200-points, the Nasdaq closing at a record high, and the S&P 500 needing a last hour rally to give it a 1-point gain. This is all following last week's volatile week of trading with some negative chart implications that have yet to be voided. Yields moved sharply higher so it has now been 8 days since they found support and started rebounding.
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Daily TSP Funds Return
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The results were OK on Tuesday but most of the gains came via the large tech stocks, particularly Nvidia which rallied another 7% yesterday. Otherwise stocks were fairly negative on the day with 2 stocks down on the NYSE for every one that was positive. Even the Nasdaq had more stocks down than up but again Nvidia and other big tech stocks trading at high volumes helped push that volume breath into positive territory.
Here's what has been happening to Nvidia since their earnings last Wednesday. Volume is up and it's all positive. Can one stock keep the stock market rally going? We've seen it before with the old "as goes Apple, so goes the market..." situation, so it can happen.
The 10-year Treasury Yield was up sharply as inflation concerns are still alive and Fed members continue make comments about rate cuts not being needed as soon as investors might be expecting them. The 10-year closed back over 4.5% for the first time in almost 4-weeks.
The dollar was down but it closed well off its lows, and managed to close above the 50-day EMA again, after opening below it yesterday.
The market leading Dow Transportation Index was also down again and testing key support.
We did have a Hindenburg Omen Signal last week. This indicator tends to be more useful when the signals come in bunches. Otherwise the signal has only "worked" about 25% of the time:
More on the Hindenburg Omen from Google Gemini:
"The Hindenburg Omen is a technical indicator used in the stock market that suggests a potential for a major market decline. It's named after the Hindenburg airship disaster of 1937, which is seen as a symbol of sudden downfall.
The Hindenburg Omen is a composite indicator, meaning it combines several other indicators to generate a single signal. The three main components are:
"New 52-week highs: This measures the number of stocks hitting new highs over the past year. A high number of new highs suggests a strong market.
"New 52-week lows: This measures the number of stocks hitting new lows over the past year. A high number of new lows suggests a weak market.
"The McClellan Oscillator: This is a breadth oscillator that measures the difference between the number of advancing and declining issues on the New York Stock Exchange (NYSE). A positive reading suggests a strong market, while a negative reading suggests a weak market.
Interpretation
"The Hindenburg Omen is triggered when all three of the following conditions are met:
"The market is in a strong uptrend.
"There is a significant increase in the number of new 52-week highs relative to new 52-week lows.
"The McClellan Oscillator falls below zero."
We will get the PCE Pricing and Personal Spending and Income Reports on Friday. With yields trending higher recently, these reports might make or break the current bullish trend in the stocks market, depending on their impact on yields.
The S&P 500 (C-fund) was up slightly, but basically flat, which has been the trend in the days following a negative outside reversal day. We saw that in April...
... and in July of 2023, as I have been harping on, and will continue to until this comparison ends.
DWCPF (S-fund) had another negative outside reversal day, although officially it may not have. It did make a higher high and lower low compared to Friday's trading range, but it closed above Friday's low. It's dancing on the 50-day EMA, trying to hold onto key support, but that open gap looms about 20-points lower.
Now the BND (bonds / F-fund) chart was a different story. It had a clear negative outside reversal day, which is another red flag for bonds, the F-fund, and for potentially higher yields.
The EFA (I-fund) was flat and behaved similar to the S&P 500 which had Nvidia's help, and that may have been because of the small boost it got from the lower dollar.
Thanks so much for reading! We'll see you back here tomorrow.
Tom Crowley
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