TSP Talk Blog

Stocks were mixed again, but mostly higher on Friday with the Dow gaining 136-points[/COLOR] and large caps leading the way. The Nasdaq rallied late to push into positive territory, as did the I-fund, while small caps took a moderate loss on the day. Bonds had a strong day gaining 0.20% on Friday.

Daily TSP Funds Return More returns

Apple had a big week and since it is such a large company and heavily weighted in the Dow and S&P 500, it's no wonder they both outperformed the small caps. So, for the week the C-fund gained 1.42% while the S-fund lost 0.65%. The I-fund shed 0.12% on the week.

The July jobs report came in lighter than expected with 157,000 jobs created vs. estimates closer to 200,000. The unemployment rate came in as expected at 3.9%. The initial morning reaction was negative but with May and June's numbers revised up a combined 57,000 jobs, investors may have seen it as a wash so the dip buyers didn't take long to show up. Also, the July miss may have had investors suspecting the Fed may not be as aggressive with rates in the coming meetings.

Moving forward in this normally weaker than average months for stocks, the market seems to be running smoothly and operating as if there is no fear of a trade war, which had been a major concern for the first half of 2018. U.S. stocks are near all-time highs while the Chinese market has been tanking, so is the war over?

My feeling is that stocks may be pricing in a trade war victory a little too prematurely, and now that earnings season is winding down, investors will look for new catalysts and any unfavorable news on the trade front could turn the victory dance around quickly and any stocks that have discounted the trade war as a threat, could get hit again.

The VIX closed below 12.0 for the first time in about two months so we may be seeing some complacency again which may be related to the trade war being declared over, and that may be premature.

The caveat to my suspiciousness of the recent strength is that the stock index charts look quite good and that is important and tough to fight. It could take a black swan type of event to change that. Could it be trade related or maybe something geopolitical? It's tough to anticipate something like that, and harder to base a trade on, but I'm not sure I want to be complacent - in August - while stocks are near all-time highs.

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The S&P 500 / C-fund crept back into the gap that was created back in January and was nearly filled in July. The action in the chart looks good although there is some overhead resistance, as there usually is when you're flirting with new highs. The trend is up, the indices may be stretched but the recent dip erased some of those overbought conditions. I really wish that open gap near 2765 was filled during that dip because now it's still there for the bears to target.




The small caps (S-fund) found support at the 50-day EMA last week, and after a rally last Thursday, recaptured the rising support line. There's an interesting dichotomy going on with a lower low being created when comparing last week's low to mid-July's low, but ignoring the July low shows a higher low. We still haven't seen a new high so I'm not sure what to make of this technically. If it makes new highs we'll have our answer.




The Dow Transportation Index is still flirting with the June highs but has yet to be able to surpass it, as we're seeing on several charts.




The Financials pulled back after making a double top last week. The 20-day EMA and rising support line held on the dip, so this is still doing fine.




The EAFE Index (I-fund) gapped down hard on Thursday and on Friday it inched up into the new large open gap. This is a bear market in my mind, and that makes the 200-day EMA, and now the 50-day EMA, formidable levels for the bulls.




If we're judging the trade war by the charts of the U.S. stocks market vs. China's, it would appear that China is losing. But how easily will they be willing to lay down and let that happen, if they do have other options? That's what I'm concerned about for this month. The headlines may wake up those complacent investors.




The AGG (Bonds / F-fund) had a nice day defying the negative chart formation that had a break down written all over it. It's back above both the 50-day and 200-day EMAs, and as I've said many times before, technical analysis doesn't seem to work as well on this chart.




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

Tom Crowley


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