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Does Friday's rebound mean the lows in in, or do we need to see a test of Feb's lows?

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Stocks were mixed on Friday, but mostly higher despite the Dow losing 71-points. McDonald's was a drag on the Dow and the broader indices did much better with the small caps and the Nasdaq doing especially well. The Dow was down nearly 400-points at the lows on Friday morning so we did see some dip buying after a sharp 3-day sell-off.
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Tariff talk is going to be the grumbling on Wall Street as investors digests the President's intentions. Rumors of Chief Economic Advisor Gary Cohn leaving the White House has the market a bit on edge too, but we may have seen the indices get on the oversold side in the short-term causing some buying to close the week. For the week the TSP stock funds lost between 1% and 3% so the buying helped ease those losses.

Yields rebounded as bond prices fell again reminding us that, despite some attempts by bonds to rally, we may continue to see investors selling the rallies in bonds, and that's typical bear market action.


The S&P 500 / C-fund had a nice day after a positive reversal day. It is still below the 50-day EMA so we have to keep more of a bearish bias, and there are plenty of big rallies when stocks are in a downtrend. This "could" be a bottom, but be careful. A test of the February lows is always a possibility, and good one. We're seeing that already in the EAFE Index (I-fund).




The 2015 and 2016 10% corrections had similar up days, and positive reversal days while in their relief rallies, like we saw on Friday, but alas, the lure to test the lows won out both times back then.




The weekly chart shows a negative outside reversal bar, and these are weekly bars, so that's a red flag for the intermediate-term.




The small caps / S-fund had a big day on Friday as it found support at the bottom of the parallel rising channel, which is a possible bear flag. It closed below the 50-day EMA and that will be a test for a struggling market to start the week.




The price of oil is on our radar since its chart resembles the chart of the stock indices. It closed off the lows two days in a row so it may be trying to find a bottom, but it hasn't been able to get back above its 50-day EMA yet.




The EAFE Index / I-fund looks like it wants to be the first of the indices that we follow, to test the February lows. It's nearly there now.




The AGG (bonds / F-fund) has been trying to breakout from its descending trading channel (blue) but it seems to be stuck below the 20-day EMA, and in the process, it has created another bear flag.




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

Tom Crowley

Posted daily at TSP Talk - Market Commentary

The legal stuff: This information is for educational purposes only! This is not advice or a recommendation. We do not give investment advice. Do not act on this data. Do not buy, sell or trade the funds mentioned herein based on this information. We may trade these funds differently than discussed above. We use additional methods and strategies to determine fund positions.

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Comments

  1. userque's Avatar
    "...as investors digests the President's intentions."

    I don't think his intentions are the issue. Regardless of his intentions; I do think investors are concerned with, and want to "digest," the effects of any tariffs.

    --
    the road to hell is paved with good intentions

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