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| Today's Commentary |
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Pulling back Stocks slipped again yesterday, particularly small caps, as the overbought pullback continued. The Dow gave up 39-points - most of that loss came after the release of the Fed's Beige Book report at 2 PM ET.  For the TSP, the C-fund fell 0.69% on Wednesday, the S-fund lost 1.33%, and the I-fund gained 0.52%. The F-fund (bonds) was up 0.19%. The S&P 500 is showing the early signs of a temporary top; having been turned back from the 200-day simple moving average. The MACD indicator continues to give a negative divergence as the higher high on the S&P 500 in July is not being confirmed by the MACD, which has produced a lower high.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk The new high in the S&P does create a new rising support line connecting the higher lows, so after the 50 and 200-day EMA's, that trend line would be the first projected target of any continued pull back. The old resistance line, which was broken last week, would be the next support area. The VIX, or volatility index, has seen a series of lower highs, but has been finding support near the 23 area and that level has produced pullbacks since the market peak in late April. We saw it tested again this week and so far it has held, and while we are seeing a series of lower highs on the indicator, there is room for a move to the 30 area, which would probably produce a sharp decline in stocks if it happens.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk A little follow-up on the dollar shows that the 200-day EMA just keeps hanging in there, but the fact that it is not exactly bouncing at this level might indicates that the recent downtrend will likely continue. This would probably be a positive for stocks - particularly the I-fund. But if it is going to bounce, it needs to so so soon.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk We have several important economic reports on the schedule over the next week or two, with the big jobs report coming next Friday (Aug 6). The market has been reacting positively to corporate earnings reports, but seems to be hiccupping on these economic reports. This sets up an interesting test for the market as the 2nd quarter earnings reports wind down. Thanks for reading! We'll see you back here tomorrow. Tom Crowley |