TSP Talk Blog

Another quiet choppy day to start the week as we head into today's first wave of big tech earnings after the bell. The Dow gained 66-points, the S&P was up slightly, the Nasdaq and small caps were down, and the EFA / I-fund was up as the dollar seems to be on the move lower again. Bonds and the F-fund were up as yields slipped lower.

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It's been quiet leading up to this evening's earnings releases after the bell, and by next week we could have new ballgame on our hands. Until then, let's talk small ball.

First Republic Bank, one of those regional banks that everyone is focused on, reported earnings after the bell yesterday with all the pageantry and drama that you might expect from CNBC . They did beat earnings estimates handily but the stock initially traded down sharply after rallying 12% during the day before reporting earnings. Deposits were down 41% from the prior quarter, which was the eye opening headline, but they also announced that they will be laying off 20% to 25% of their workforce to reduce costs.

That brings us the jobless claims, which have been on the rise recently, most notably in the big technology companies over the last several months. The labor market has been hanging on resiliently despite the threats of recession, but we may be seeing the cracks starting to show.

Is that important, or telling? The trend of the jobless claims does seem to be a decent indicator of market movement. The number has not gotten excessively high yet by any means, but we could say that the trend has started to change since the low just last month. These Jobless Claims reports come out each Thursday morning.




Yesterday I showed you how bearish JP Morgan's invertors were -- 95% think stocks will be lower by years end, which is unheard of. Today we may see a stat that could be more realistic considering the recent market action, and that is the Fear & Greed Index from CNN Business. You can click the chart below to see a larger, more clear image. The red line is the S&P 500. The blue is the Fear & Greed Index. Right now, at 64, it is close to the top end of its range meaning more greed than fear from investors at the moment. That's a lot different than the sentiment of those JP Morgan folks.


Data from www.cnn.com/markets/fear-and-greed


As always, I am keeping an eye on the dollar. The I-fund is largely impacted by the direction of the dollar - inversely, but a weaker dollar tends to send prices higher on many things including commodities and US stocks, as you can see in the chart below.



The dollar is well off its highs, and after a rally a week or two ago, it may have run into some trouble again and could be looking to fill that small open gap near 27.51. But if it continues lower from there, stocks may continue to have a cushion under them. Unexpected talk of even higher interest rates from the Fed at next week's FOMC meeting could be a catalyst for a rally. A pause would likely send it lower so the market seems to be pricing in a pause.

Microsoft, Amazon, Google, and Facebook (Meta) report earnings this week so it could be a choppy week if they are not all telling similar stories. The PCE prices reports will be released on Friday - a big one for the Fed. The Fed FOMC meeting, Apple earnings, and the April jobs report are on the schedule for next week.

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The S&P 500 (C-fund) had a slow day with little progress. Not much more to report here except that it continues to flirt with the bottom of that rising trading channel and the overhead resistance.




The DWCPF (S-fund) has fallen below one bearish flag formation (red) and it's trying to hang onto the lower one (blue.) If 1640 breaks there isn't much support below that until the March lows.




The EFA (I-fund) still looks fine except for the Swiss cheese of open gaps below. If the dollar stays weak, this could continue to lead. More rate hikes announcements from the Fed could also roll this over.




BND (Bonds / F-fund) jumped to start the new week and it is now facing one of the overhead open gaps. The support at the major moving averages has held firmly so far.




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

Tom Crowley




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