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Sell the news continues as tax bill protesters reverse morning rally

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Another positive open turned into a down day on Tuesday and we saw modest losses across the board yesterday. The Dow lost 109-points with a similar decline in the S&P 500, while the small caps and the Transports lagged with more significant losses.
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The Nasdaq was powering higher early in the day before everything reversed down, and it reversed hard.

Protestors at the Capitol yesterday were trying to influence lawmakers from passing the tax bill, and that seemed to be a part of the reason for the decline. But at this point it's a 3-day pullback, and 3 to 5 day pullbacks have been about the best the bears have been able to do since Labor Day weekend.

The November jobs report will be released this Friday morning and consensus estimates are looking for a gain of 190,000 jobs and an unemployment rate of 4.1%.

The SPY (S&P 500 / C-fund) slipped yesterday and is now firmly back within the rising trading channel, but there's nothing too bearish about that for the market in general, and even a short-term pullback to the bottom of the trading channel or the 50-day EMA wouldn't change that, but a breakdown from there would get some attention. Early to mid-December pullbacks are not uncommon as tax selling or profit taking gives investors some needed cash for the Santa Claus rally that we all expect toward the end of the month.

The DWCPF (small caps / S-fund) slid 0.76% on the day, pulling back from its rising resistance line. At this point there is nothing too concerning. We expected a possible test of last Thursday's low, and like the S&P 500, testing the rising support and / or the 50-day EMA would do nothing to the bullish picture - assuming they hold.

The Dow Transportation Index had a reversal day on Monday and yesterday saw some downside follow-through. It just seems to be digesting the recent big gains from the post-Thanksgiving rally.

The EAFE Index (I-fund) is testing the 20-day EMA which has held several times over the last few months. It broke below it in November when the dollar was rallying, but the 50-day EMA held and the rally continued.

Here are a couple possible outside concerns that could impact stocks. Not that they will, but let's keep them on the radar.

China's market fell out of rising trading channel a couple of weeks ago and recent talk of a slowdown in their economy could reverberate in the U.S. markets if investors are looking for more reasons to take profits.

The price of copper seems to reacting to that economic concern in China after a big big sell-off yesterday. It cut right through the 50-day EMA so someone was taking it pretty seriously. Copper used to be a good barometer for the economy but it fell for 5 years, from 2011 to 2015, and the economy was holding up just fine during that time, so this could just be a false alarm.

The AGG (Bonds / F-fund) rallied yesterday on the selling in the stock market, but the wedge formation remains intact.

Read more in today's TSP Talk Plus Report. We post more charts, indicators and analysis, plus discuss the allocations of the TSP and ETF Systems. For more information on how to gain access and a list of the benefits of being a subscriber, please go to:

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

Tom Crowley

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