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Market Commentary

June 17, 2019

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 Today's Commentary         (Not seeing a current commentary?)


Stocks were down modestly on Friday, and it took a late sell-off to push the indices into the red.  The small caps and Nasdaq lagged with sharper losses while the Dow gave up just 17-points.  The rally in the dollar hurt the I-fund while the larger cap U.S. stocks of the S&P 500 were off just slightly.  Trading volume was very light as we get closer to the Fed's FOMC meeting this week.

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As we close in on the latter half of June and the end of the first half of 2019, we can see the annual returns for stocks are still quite impressive.  But we are seeing more evidence of an economic slowdown, and the Fed is on deck this week to address it.  Right now the market is pricing in a 23% chance of a rate cut at this week's meeting, and an 88% chance of a cut by the July meeting.

The interesting thing about the Fed cutting rates at this juncture is that the unemployment rate is 3.6%, near historic lows and considered more than just "full employment", and back in early 2017 Janet Yellen considered the 4.7% unemployment rate close to "maximum employment."  So a few years ago it would have probably seemed unimaginable to get a rate cut while under the current conditions.  I assume the Fed is grappling with this dilemma, but their aim is certainly to cut off any chances of a recession before it rears its ugly head.

Back in September 2007 the unemployment rate was 4.7% when they started to cut rates.  Of course it was on its way to double digits eventually so the rate cuts didn't save the economy, nor the market back then.
                              


The dollar is bouncing back strongly from the recent pullback to the bottom of that rising channel, and that's putting pressure on the I-fund, which was the only TSP fund in the red last week.

             


The dollar also put pressure on the already beaten down copper market, and these are indications of the economic slowdown.

             


And while the price of oil got a bounce last week on some geopolitical events, it is still close to the recent lows.  It is quite oversold, as is copper, so if we don't see a rebound soon, perhaps the economic slowdown is getting more serious than many of us thought, and could be part of the fodder for a rate cut from the Fed?

             


The 2-day FOMC meeting starts on Tuesday this week, with a policy statement and interest rate decision announcement on Wednesday afternoon.


Administrative Note:  I may be redesigning the page URL's in the coming days because there was a very strange, very sudden drop in the number of people reading the free market commentary page, www.tsptalk.com/comments.php, and it seems to have happened almost overnight.  I am not sure what caused it but what makes sense would be that perhaps some government agencies or military departments started blocking the page?  Just a guess.  I did noticed that we still get hundreds of views on the old commentary page which was comments.html and out dated, rather than the current  comments.php, so I've added a redirect.  php files may be interpreted as program files and may be more apt to get blocked by virus programs.

If it turns out that traffic is really getting as low as our recent reports suggest for that page, I don't see a reason for me to put much time into them anymore, but because other pages of ours have actually increased during that same time, I am inclined to believe that is not the case.  Our TSP Talk Plus subscribers get a very similar commentary with various additional information, and the page views there have grown, so that is why I am speculating on possible page blocks or other technical issues such as our firewall.  I will play with a few options to see if it helps and I will keep you posted on any URL changes.  Thanks.


The S&P 500 (C-fund) has pulled back from that crazy, straight up, 5+ day rally but it is still just off that peak.  The question now is whether that was a lower peak - compared to the May 1 high, or if it's forming a bull flag and prepping for a breakout?  It looks like it can go either way right now, and the other charts may be giving as better clues than this one.

         


The DWCPF (S-fund) also has a bullish looking flag on it, and the 50-day EMA has been holding for a several days now.  The Russell 2000 chart doesn't look quite this good so I'm not sure what the fate of the small caps will be.

         


The EFA (I-fund) got hit hard on Friday with that 0.53% gain in the dollar.  In the process of trying to fill the open gap near 64.80, it opened another one up by 65.50.  This chart has no bull flag but rather a lower peak, which is what we're worried about on the S&P 500 chart.

      


The Dow Transportation Index was down on Friday, but it bounced back from some sharper early losses.  It failed again at the 50 and 200-day EMAs so this looks suspect.

      


The AGG (Bonds / F-fund) was down slightly on the day, but is still near the highs, and yields moved up and are still near the lows.  If the Fed doesn't cut rates on Wednesday we could see a little pop in yields, and pullback in the F-fund, but if they do cut rates, we could see a breakout and a breakdown, respectively.

     


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


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Chart provided courtesy of www.sentimentrader.com
 
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SPY (C Fund) (delayed)

(Stockcharts.com Real-time)
DWCPF (S Fund) (delayed)

(Stockcharts.com Real-time)
EFA (I Fund) (delayed)

(Stockcharts.com Real-time)
AGG (F Fund) (delayed)

(Stockcharts.com Real-time)

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