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Before yesterday we might have thought that a weaker jobs report may be viewed as a positive to perhaps keep the Fed from raising interest rates this month.  But after yesterday's comments from Fed Governor Waller, that may already be priced in, and we may have to start worrying about economic growth, particularly since the July jobs report saw a loss of 23,000 jobs. 

And, if it is too strong, it may negate Waller's dovish comments and get the Fed leaning hawkish again.  So it may be a tough number to bring to a perfect landing.  It's really a tricky situation with these dovish comments coming two days before a major holiday where, as we talked about yesterday, there is strong tendency for a move against the general trend that reverses back after the holiday.

With a September rate hike moving from a 63% chance to a coin flip again, this is a major catalyst, but can we trust the reaction?

         

Outside of corporate earnings, yields and interest rates may be the biggest catalyst for the stock market, and of course interest rates help dictate earnings, so they may be the most important financial indicator. 

The 10-Year Treasury Yield was down yesterday, as we might expect on Waller's comments, but not that much, and it closed well off the lows and near the highs of the day, so maybe the bond market didn't trust it.  There is still some room below for a pullback in yields if the bond market needs a relief rally.  Yields move counter to bond prices.

     

And here is BND (bonds / F-fund) which rallied initially yesterday, but came off the highs when it hit the resistance from the bottom of the bear flag, plus it failed to recapture the 200-day average after getting above it early on Thursday.  Again, it may have been a pre-holiday reversal after Monday's breakdown.  It may not have been convincing, but it did help the stock market. 

The dollar also flipped over on the remarks from Waller.  It had hit the 50-day average and the top of a descending channel, so it may not be a surprise, but that's yet another pre-holiday reversal from the prior week's action. 

        

A lower dollar helps raise prices in general so we saw things like bitcoin and gold move up sharply yesterday, along with almost everything else.

The S&P 500 (C-fund) continued its "pre-holiday reversal", but now we have to decide if the reversal was the seasonal type, or an actual reversal off of support that had nothing to do with the holiday weekend.  The action created a great looking bull flag.  It could break out of a favorable jobs report - whatever that would look like, or it could reverse down again to the bottom of the flag. 

       


I have to admit it looks good, but who wants to buy in early September?

           
               Source: https://sentimentrader.com/ - analysis by TSP Talk

Bottom line:  The charts found support early this week and the interest rate picture may have gotten better (as we wait for the jobs report), but is this a pre-holiday trap?
 

Additional TSP Fund Charts:
 

The DWCPF (S-fund) had a big day yesterday as it has now recovered Friday and Monday's losses.  Yesterday's highs filled in a very small open gap from last Friday, and it opened up another gap near 2840.  It is still trending lower being below that blue descending resistance line, but it is back above the 50-day average.  The longer-term support held without any trouble a couple of days ago, so this looks pretty convincing, but oh, those holiday reversals.  Can we trust it?
 
       


The ACWX (I-fund) had a 1% gain and it is back flirting with new highs after the recent pullback.  It looks good but... don't make me say it again... (holiday reversal?)  :)

        


Thanks so much for reading!  Have a great holiday weekend!