The Dow was down again on Wednesday, a seventh straight day, but that has been a smoke screen to the impressively strong rally in tech and especially the small caps recently. The Dow lost 42-points but once again the money from the large caps is being put right into other sectors that are not as impacted by the tariffs.
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There was a change in character in the day in that the open was stronger than the close for the first time in a while, but we still got the midday rally.
If we dismiss the small caps, the charts are looking a bit heavy, but if you're in the S-fund you wouldn't even know there is a problem, and perhaps there is not if this rotation continues. But if the Dow and S&P rollover, as we are seeing in the financials and some overseas markets, I suspect the small caps will eventually follow, although one thing we probably should have learned from 2017 is to stick with what is working because it seems to last longer than seems reasonable. But as we saw in February of 2018, when the rally does end, it could be ugly in hurry so if you are in the small caps, don't get too complacent.
Reminder: I apologize, but I'm going to be in and out of the office over the next couple of weeks [starting 6/7], doing some traveling. I will be checking emails and posting premium alerts as usual, and I will posting something here everyday, but it may be quick updates and my timeframes may be off a little. The AutoTracker may also be updated later than normal. I'll be back to my normal schedule on Monday.
The S&P 500 / C-fund got a little bounce yesterday but is still struggling some below those resistance lines. It's near the top of its post-correction trading range, and the question is whether it can breakout to the next level, or if that rising wedge is going to give-way and breakdown as they tend to do.
The small caps (S-fund) was a different story. It made the outlier move and broke above the rising wedge earlier this month. That 1440 area held well and right now that is the level to keep an eye on. Anything below that and you would need to be careful if you're in small caps.
The Dow Jones Transportation again tested the bottom of the F-flag and is still flirting with a breakdown - which is what F-flags tend to do.
The EAFE Index (I-fund) got a small bounce yesterday but it is still below the 200-day EMA after breaking down below it on Tuesday.
The overseas charts are looking a bit precarious - the German DAX, the Chinese Shanghai Index, the Nikkei, and this chart of Frances CAC 40 Index just broke down from a bear flag this week.
The AGG (Bonds /F-fund) was down on Wednesday and the 10-year Treasury Yield did find some support at the bottom of that open gap as we talked about yesterday. There is a large open gap up higher near 3.05%, which would be trouble for bonds prices and the F-fund if filled, but there is a possible downtrend forming so watch that descending resistance line.
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Thanks for reading, and thanks for your patience over the time I am out and about.
We'll see you tomorrow.
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