More returns The September Consumer Price Index increased 0.2% month-over-month, leaving it up 2.4% year-over-year versus 2.5% in August. The Core Consumer Price Index, which excludes food and energy, increased 0.3% month-over-month , leaving it up 3.3% year-over-year versus 3.2% in August. The food index increased 0.4% month-over-month following a 0.1% increase in August. The energy index declined 1.9% month-over-month following a 0.8% decline in August, so those were the hot numbers. You can see that the trend is down in both the CPI and the Core CPI, but the Core has curled up again, garnering some negative attention. The warm CPI sent longer-term yields higher and the 10-year Treasury Yield is bumping up against its 200-day EMA after cutting through the descending resistance line earlier in the week. Stocks have been holding up better than I thought given the rally in the yield up to the current 4.1% level. That is 50 basis points above the September lows of 3.6%. The dollar was actually down slightly after a morning rally filled an important open gap, then reversed lower. Has the dollar peaked? Look at all of those open gaps below. Is this a set up for the I-fund to play catch up? October has not been favorable for the I-fund because of that rally in the dollar. As we have been saying for months, stocks tend to struggle in the months leading up to the election, but they do well after the election once the unknowns are out of the way, but this year stocks have been sticky to the upside before the election so far, so our job is to figure out if that is a sign of strength in stocks, or if the pre-post election action is going to be the opposite of the pre-election action. That may be a tough task, especially since the chances of not knowing who won the election right away is quite high. Unless it is a blowout, the close states will be counting, recounting, taking legal action, and who knows what else, as this has become the routine political process. Will the stock market survive more than a few days of limbo after the election? Our thoughts and prayers go out to the victims of the recent hurricanes. It has been a rough season and I hope nobody was hit too hard. Holiday Monday! The TSP will be closed on Monday October 14, for Columbus Day. They will not be processing transactions so we will also take the day off here at TSP Talk. Admin Note: In the coming weeks we may be working on a server and software upgrade, starting with the forum, that could disrupt the website periodically. I've procrastinated long enough and it's time to get it done. The maintenance could take part or all of the website down at times, but it will not impact Premium Service email and text alerts. I'll keep you posted. The S&P 500 (C-fund) had one of those boring inside days where the high and low of the day was between the prior day's highs and lows. It's a neutral signal but generally means the trend is likely to continue. That's a surprisingly mild outcome after the release of a report as important (these days) as the CPI report. The chart looks favorable as far as formation, but there is clearly overhead resistance in the area. DWCPF (S-fund) has been coiling sideways for weeks. We saw somewhat similar consolidations in recent months - one resulted in a big rally, and one preceded and devastating sell off. To me this is looking bullish but if the Fed starts talking about putting the breaks on rate cuts, it may not end as well for small caps. The I-fund:The EFA was down 0.12% yesterday, ACWX was up 0.02%, and the "ex USA ex China ex Hong Kong Index" was down 0.08%. This guessing game may go on through the end of the year as the TSP transitions into the new tracking index, which is supposed to eventually mimic the "ex USA ex China ex Hong Kong Index." You can see the TSP's eventual final daily price and return posted on our site each evening. The dollar may be interested in topping here, which could be a good sign for the I-fund, which has lagged badly so far this month, but is looking for support again at the 50-day EMA. BND (Bonds / F-fund)was down slightly again. Yields were mixed with longer term yields moving higher and shorter term falling slightly. This chart, with the 75-day average holding, suggests that the PPI report this morning could be favorable for bonds (lower yields?) That is unless it would rather fill in that open gap down near 73.25 first. Thanks so much for reading! Have a great weekend! Tom Crowley Read more in today's TSP Talk Plus Report. 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Stocks were down modestly yesterday after a warm CPI report and the weaker than expected jobless claims number. As we head into earnings season investors will have to decipher if the market has already fully priced in the September rate cut, the seemingly less hawkish Fed, and an economy that refuses to rollover despite the many concerns. Bond yields moved higher again sending the F-fund down for the 6th time in 7 days.
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I was wrong about the CPI report which actually came in a little hotter than expected, prompting talk about a possible pause in interest rates cuts at the November 7th meeting, but that's a long way away. It was hardly an alarming result but I was not expecting any problems. There's a lot more data to come between now and the Fed meeting, plus the election, which could be an interesting pivot point for the Fed, the economic outlook, and the stock market.
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