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TSP Talk: A very mixed picture as yields have their impact again

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It was a day of new all time highs for the Dow, and the S&P was close if not for a late tick lower, but for the rest of the market... not so good. Small caps were pounded again, and the Nasdaq saw some moderate losses. Bonds were down as yields rallied. There's a lot going on, but what's real, what's hype, and what's it all mean?

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We're seeing a pick up in COVID warnings out of the CDC again, so could that be what's impacting the small caps? Perhaps it's the higher yields? We asked yesterday what happens in the yield on the 10-year moves over 1.7% again, and yesterday that happened, and we saw what happened to small caps, and to a lesser degree, the growth companies of the Nasdaq.




The Dow and S&P 500 are making new highs as we said, but the Nasdaq and Russell 2000 charts just aren't looking that great.




One of the stories we're watching, and we touched on it yesterday, was the forced liquidation from Archego's Capital Management. They were extremely leveraged in some of their accounts (8 to 1 and even 20 to 1 leverage ratios in some accounts), and the brokers hit them with margin calls forcing them to sell. This is small by comparison, but it's somewhat reminiscent of the 2008 Bear Sterns and Lehman Brothers collapses in 2008, which turned out to be a shot heard round the world.

The question is, how many other funds out there are doing the same thing, and may be next in line for massive margin calls and more forced selling? I don't know how much of that the market would be able to take.

Back to the market - on a day when the Dow and S&P 500 were making new highs (have I mentioned that yet?) the internals were awful yesterday. The Nasdaq and small caps are doing some internal damage.




The question here is, is the stimulus and Fed policy just too dovish for the entire market to go down, causing these rotational, sector specific sell offs, while the rest of the market does fine? I'd have to guess that the Fed would outweigh the problems, but how many more warning signs can we take?
Friday is a market holiday but from what I'm seeing the March jobs report, which is normally scheduled on the first Friday of each month, may be released that day despite the holiday on Wall Street.

Because the market is closed on Friday, I won't be posting a market commentary that day.

March Madness contest links: More Info. Yahoo! Tourney Pick'em.




The S&P 500 (C-fund) banged up against that old high about 10 or more times yesterday but it couldn't quite break through. With yields up again, perhaps we'll give it an excuse. If yields happen to pullback today, which is no guarantee, the excuse may be gone and it will be time to make its move. If it can't, that could mean trouble. Friday's rally was quick - at the end of the day - and perhaps the index just needs a couple of days to digest that big move.




The DWCPF (small caps / S-fund) just doesn't look well. It fell back below the 50-day EMA yesterday after just one close back above it on Friday. We've seen the occasional strong daily rally recently, but they have been failing quickly thereafter. Warning sign, or buying opportunity? That's the dilemma.




The EFA (I-Fund) is still in a nice rising trend holding at key support. There's an open gap near 75.60 that could get filled on the next pullback, and we'd want to see that area hold there if it does.




BND (bonds / F-fund) was down yesterday and may have already broken below a bear flag. How high can yields go? That answer will may tell you how far down the F-fund might go.




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Thanks for reading. We'll see you back here tomorrow.

Tom Crowley




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S&P500 (C Fund) (delayed)

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

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

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

(Stockcharts.com Real-time)

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