TSP Talk Blog

Stocks posted solid gains on Wednesday after some comments from Janet Yellen put investors' minds at ease. The Dow gained 123-points but that was about 50-points below the morning highs so there was a little profit taking after it hit new highs to start the day. The gains were quite broad, which was a change from recent action.

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The Fed didn't disappoint and it continues to be a friend of the stock market. Before the bell on Wednesday the futures shot up after the text of Janet Yellen's testimony to the house financial services committee was released and we saw a big jump in stock prices at the open.

Basically it sounds like they still plan to unwind their balance sheet, but they may not do much with rates until the end of the year (at the earliest) while they monitor the economic situation and that was music to the ears of growth investors. That gives them, investors, a little something to go on for the next several months.

The SPY (S&P 500 / C-fund) gapped up on the Fed testimony before congress yesterday. and broke above its recent descending resistance line. It's now above all of the major moving averages but also getting closer to the top of its 240 - 244 range that it has been in for several weeks.




The DWCPF (S-fund) posted a brief new all-time high near the open, which created an open gap on the chart, but it closed back down in the trading range. The bear flag (blue) did not pan out as the Fed pushed that out of the way, and that large more bullish flag (red dashed) is still in play - but it could always fill that gap and test the bottom of that flag again before trying another breakout.




A closer look at our S-fund index shows the failed breakout and the strength of the resistance at that 1237 level.




The Nasdaq 100 also gapped up and improved nicely, but the descending trend hasn't officially been broken like we saw on the S&P 500 chart, so it is still below resistance.




The Dow Transportation Index moved back above that March high as it continues to dance above and below that level and flirts with new highs.




The EFA (EAFE Index / I-fund) gapped up and traded right back into that apex of the pennant formation. A test of the old highs seems possible but we have to look for that gap to try to get filled in the coming days.




The AGG (bonds / F-fund) also gapped up as everything seemed to rally on Wednesday... stocks, bonds, gold, credit, oil, you name it. The Fed has that kind of power. The 109.75 area may be the next target but since support broke, we may have to assume a new downtrend is starting.




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

Tom Crowley


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