06/16/25
Stocks were hit by a geopolitical event on Thursday night that created a reason for investors to takes some profits, or worse, although it is way to early to claim any change in the stock market environment. It was a knee-jerk reaction to scary situation before a weekend, so this week the market will have to put the pieces together to figure out what it means for financial conditions. Bonds were down, which is an interesting tell as bonds tend to rally (yields fall) during uncertain times, but that wasn't the case on Friday.
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Daily TSP Funds Return
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The TSP stock funds gave back about half of June's early gains on Friday, and while the seasonality calendar suggests some weakness in the middle of the month, we never know what the catalyst will be. Now we know, but is this a brief pause in the bull market, or the start of another downturn?
The S&P 500 (C-fund) chart shows just how modest Friday's losses were in the grand scheme of things. We basically saw the loss of the grinding gains from the prior 5-days after hitting some overhead resistance in an overbought market, but the S&P 500 had gained 250-points since May 27, or the past 13 trading days. Trading volume was no higher than any recent action so it wasn't intuitional selling. Not that this cannot not get worse before getting better - and the Sunday evening futures have not opened yet as of this writing - but right now the charts say, don't panic. (Update: the S&P futures opened were down about 0.30% just after opening on Sunday evening.)
The weekly chart of the S&P 500 does show a negative reversal weekly candlestick, and that's not great, but that was all caused by Friday's sell off. It seems to be in the process of creating the right shoulder of a bullish inverted head and shoulders pattern and some chopping around between 5800 and 6100 would not change that situation.
The monthly chart still looks perfectly fine, but there are certainly opportunities for the bears to try to retrace some of the the past three months' bullish candlesticks. Going from 4835 to 6060 in the last two and a half months was painful for the underinvested, so there are plenty of people who would embrace a pullback, which could be a reason why any decline won't be too severe.
The chart of small caps and the DWCPF / S-fund cracked a bit after falling below the early May peak, but it is still above some key support, and if you recall last week we talked abut the 50-day EMA crossing back above the 200-day average (a golden cross) and while that is a bullish sign going forward, it typically crates a short-term overbought condition so a little dip here was right on schedule with the technical picture. We just don't want to see important support levels get taken out.
In the past when there were market or geopolitical troubles brewing, investors used to jump into bonds and gold. Bonds were up last week, but they were surprisingly down on Friday after the missile attacks, so they aren't behaving like the safe haven they once were. However the chart did its job on the 10-year Yield as support held again despite news that would have normally seen yields fall.
But gold still has that role as a safe haven as it nears all-time highs and was up sharply last week leading up to, and after, the missile attacks in the Middle East.
We looked at the price of oil in Friday's commentary, and if you recall I had posted Friday's commentary on Thursday evening before the news of the missile attack and had to inset an update, but I did make note of the recent spike in the price of oil wondering if that 200-ay EMA was going to hold as resistance again, but the news was just too much, and it turned out that the recent higher price of oil was trying to tell us something. When oil moves, gasoline prices take the escalator down, but the elevator up. Look for gas prices to move up in your area, if they haven't already.
Once again I bring up bitcoin. Not because I think you should invest in it, although that's not a bad idea, but because it is a good reflection of investor's appetite for risk. After another successful test of the 50-day EMA, bitcoin is still hanging around its all-time highs - not exactly a sign of concern. Global liquidity is still on the side of buying risky assets for a while and geopolitical events may simply provide opportunities to buy them at lower prices.
There is a lot of economic data coming out this week, but nothing too major except maybe retail sales on Tuesday. The highlight however is the Fed's FOMC meeting and interest rate decision on Wednesday.
Holiday Closing: From tsp.gov: "Some financial markets will be closed on Thursday, June 19, in observance of Juneteenth National Independence Day. The Thrift Savings Plan will also be closed. Transactions that would have been processed Thursday night (June 19) will be processed Friday night (June 20) at Friday's closing share prices."
The ACWX (I-fund) was down commensurate with US stock losses. This is certainly due for some kind of pause, but the question is how severe? The dollar was up and the UUP chart is back above an old resistance line.
BND (bonds / F-fund) was down with yields moving higher on Friday. While the 10-year yield found support at the bottom of its channel (see that chart up top), this chart also found a little support from the top of its red trading channel that it had broken above just a couple of days below.
Thanks so much for reading! We'll see you back here tomorrow.
Tom Crowley
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