Stocks had a moderate pullback from some strong early gains yesterday. The Dow lost 77-points, after being up 87-points in the morning, and we saw losses of under 0.5% in the three major indices, while the Transports, and particularly the small caps, took larger hits.
Daily TSP Funds Return
As we mentioned yesterday, the next few weeks could see the market reacting to every headline regarding tax reform and yesterday we heard Republican Senators Marco Rubio and Mike Lee say they are not 100% onboard with the current bill, and the tax sensitive stocks took a hit on that news, including small caps.
So, watch those headlines and you will probably know what the market is doing. Yesterday's losses could be erased by one statement from those Senators, or of course, the market could react negatively if there is more balking. I don't see any way the republicans would let this opportunity - whether you like it or not - get away, but it wouldn't be the first time, so you never know.
We saw some charts make negative formations with yesterday's losses, but after the recent rally, they may just need some digesting of the recent gains to give them strength for a typical holiday push into the end of the year.
The SPY (S&P 500 / C-fund) pulled back yesterday, breaking the very short-term rising support line (dashed) but it remains above the stronger support lines. Nothing damaging here yet, but if that 265 area is broken, there could be some technical damage done.
The small caps / S-fund took a good sized hit yesterday losing 0.8% and after a series of weak closes, we finally saw the bulls give up a bit - at least for a day. That 1340 area looks like solid support but I would think any more negative news on the tax bill front could take that out, although that may be a long shot. The 50-day EMA is just below that.
The Dow Transportation Index was also down moderately and it appears to be creating a flag of some sort, which would be bullish, but it could come down to 10,100 and still be in a bull flag so the short-term looks "iffy" here.
The EAFE Index (I-fund) gave back most of Wednesday's gains. The dollar was up early then drifted back lower during the day so this loss may be overdone, and that may be why the TSP gave it a better price than the -0.48% we see here. However, the index is hitting, and pulling back from, the overhead resistance line again.
The High Yield Corporate Bond Fund fell below the 50-day EMA again, but there does seem to be some buying each time it does that. I still look at the large open gap near 76.40 as a possible downside target, but for that to happen stocks would likely have to come down, and is that something we can expect this time of year?
The AGG (bonds / F-fund) was up again and its poking its head above the pennant formation. At this point I would think that only more selling in stocks could get it to move meaningfully above that pennant.
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