Stocks were up modestly yesterday but it was a fairly choppy day as we saw some decent swings in the indices. The Dow went from 130 - 150 point gains to a loss and back a couple of times, all before lunch. Small caps, which have been hot, were down for most of the day but managed to rally in the afternoon to close near break even. Bonds were down as yields rallied again.
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The chances of a 0.25% Fed rate cut next week is still 89%, so that's a pretty solid indication that it is going to happen, but as always, it's their policy statement plus the guidance for future cuts that will drive the market.
The bond market, which was pounding the table for the Fed to cut rates, has been seeing yields rise lately and that could put some doubts in the Fed's mind about cutting, but the chart is nearing some stiff resistance so I wouldn't be surprised if the 10-year yield had trouble getting back above that 1.85% area.
Yesterday we got a stronger than expected Core CPI report and that helped those yields move higher. Today we get a
Retail Sales number, plus the Michigan Consumer Sentiment and both of those could influence the Fed so we could get a market move on one or both of these if they don't come in line with estimates. .
The market has two imminent obstacles, or forks in the road, to deal with. One is the economic data in front of next week's FOMC meeting. The other is the interesting pivot points being tested in the charts right now, as saw above in the yield chart, and you'll see below.
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The S&P 500 (C-fund) nearly hit a new high yesterday but backed off into the close, and that's the concern for short-term traders who tend to sell near new highs in case we get a double top pullback, which is common. Not that a double top pullback has to be severe. They don't, but they can be. The red gap is still open down to 2940, and the spinning top looks a lot like the action we saw in June before we saw a few days of pulling back.
The S-fund was flat but it came back from some early losses to keep the chart in good shape, except for the fact that it testing the upper rising resistance line of the trading channel off the lows.
The Dow Transportation Index pulled back but closed above the old resistance line, which broke on Wednesday.
That 10,700 seems to be the key level for now.
The EFA (I-fund) had a good day while the dollar was down sharply, which is a bullish combination for this fund.
AGG (bonds) fell again and it is now just about testing that 50-day EMA. With stocks hitting resistance and bonds at possible support, is this chart, and the stock charts, about to make a reversal?
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Thanks for reading. Have a great weekend!