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Healthcare vote put on hold

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It was a classic reversal day yesterday as stocks opened flat, rallied up to some healthy gains, and reversed down to close slightly negative. The Dow was up about 100-points but ended the day down 5-points. The culprit? The House failed to vote on the healthcare bill, the event everyone was waiting for.

Daily TSP Funds Return

Small caps held onto a moderate gain although it gave up about 2/3 of the intraday gain.

The market is waiting for that vote, and whether it passes or not, its just getting it behind us. The theory is that stocks will rally if the bill passes as it could free up resources to start the process of attacking the tax relief and other policies.

It's tough to make short term calls based on all this waiting. Remember the reaction to the Brexit vote surprising passing? Stocks initially sank, but within a day or two they started right back up and that could be the case here. Pass or don't pass... the market will react likely with added volatility, and then it will do what it was going to do.

The problem is, the charts are sitting at precipices and could either fall over the precipice, or rebound off of the support that is all around. It's a tough call, particularly going into a weekend. If there's no vote heading into the weekend there may be more selling to close the day on Friday. However if there is a vote, it could all reverse.

The SPY (S&P 500 / C-fund) rallied back above that old resistance line, hit the 20-day EMA, then backed off again. It's above the key 50-day EMA and the rising support line, both near 232. That could be a bear flag, but it's only been two days since that large sell-off.




The weekly chart shows the interesting conundrum for the S&P 500. One of the major resistance lines that turned into support, the blue one below, has now been broken and that is not a small deal. The chart is sitting just below that support but we won't get that closing tick until the market closes today, obviously, so we don't know if it will end the week above or below that important support. The shorter term support line (green) has also been broken this week.




The DWCPF (S-fund) rallied up near the 50-day EMA and reversed back down. Without that House vote situation we would probably look at this action as very bearish, but we know it was event driven. It's in a new downtrend, but if I pulled this back to a longer-term chart, there is some long term support that could hold it up.




The Dow Transportation Index also rallied early on Thursday but it reversed closing down for the 5th time in 6 days, and 11th of last 14. This isn't good, and we consider this the market leader.




The Nasdaq has created a small bear flag after the Tuesday sell-off but it remains above key support.




The I-fund was up but I noticed that Japan's Nikkei Average closed below the 50-day EMA the last couple of days after holding above it for months.




The AGG (Bonds / F-fund) pulled back early to fill that small open gap, but closed above the 200-day EMA again with a small gain. Lots of resistance in the area.




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: www.tsptalk.com/plus.php

Thanks for reading. Have a great weekend!

Tom Crowley


Posted daily at www.tsptalk.com/comments.php

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Comments

  1. DCRanger's Avatar
    Tom, if the F Fund tracks the AGG, and the AGG closed at a positive .03 percent, how is it the F Fund closed at a negative .10 percent. I know there must be a logical explanation. Thanks. Gary
  2. tsptalk's Avatar
    Hey DCR...

    The F-fund doesn't really track the AGG. It's that both the AGG and the F-fund track the aggregate bond fund. The bond market closes at 3:00 PM ET but AGG stops trading at 4:00 PM ET so that last hour can make a difference in the two. The folks who manage the TSP funds have to determine the best price out of that situation.

S&P 500 (C Fund)
S&P 500 INDEX,RTH (^GSPC)
DWCPF (S Fund)
Dow Jones U.S. Completion Total Stock Market Index (^DWCPF)
EFA (I Fund)
iShares MSCI EAFE Index (EFA)
AGG (F Fund)
iShares Lehman Aggregate Bond (AGG)