TSP Talk Blog

Stocks were behaving a little tentatively on Friday morning and into the early afternoon, but a late afternoon rally saw them close at their highs and new all time highs in most cases. The Dow gained 54-points with small caps leading the way. Bonds fell sharply as 10-year Treasury yields hit a 3+ year high.

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Investors bought enthusiastically into the close on Friday despite the threat of a U.S. government shutdown Friday night. Once again complacency seems to be the theme of this bull market. Now that the government has shutdown, will attitudes change, or is a shutdown of little concern to investors? That could be the case unless if goes on for any length of time when paychecks start getting missed.

I am writing this on Sunday evening about an hour before the futures market opens (about 4:45 PM ET) so I don't know what the initial reaction to the shutdown will be yet. As I mentioned last week, most were expecting at least some kind of continuing resolution to avoid the shutdown, but as of this writing that has not happened, so that could create some kind of negative reaction.

The SPY (S&P 500 / C-fund) moved to new highs and the story remains the same: Stocks are moving higher with momentum, but the indices and the indicators are quite stretched.




The small caps / S-fund closed at a new high and remains in its short-term rising trading channel (blue) after breaking above the longer-term resistance line (red).




The EAFE Index (I-fund) has been going parabolic for a few weeks now, thanks to a dollar that has been tumbling, while global indices are rallying.




The High Yield Corporate Bond Fund floundered a bit last week, potentially breaking down from a lopsided bear flag. It's below a couple of resistance lines (one being the old support line). This could be a warning sign, but it's certainly not a blatant one yet.




The AGG (bonds / F-fund) fell sharply for a 2nd straight day and below the 200-day EMA, and that could be a long-term problem for bonds, but in the short-term it may be due for a bounce.





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


Tom Crowley



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