TSP Talk Blog

07/23/13

Stocks opened lower on Monday, but as we have become accustomed to, the buyers showed up and the indices closed higher. The Dow gained just 2-points, but we saw larger gains in the broader indices.

Daily TSP Funds Return G-Fund: +0.0177% F-fund: +0.09% C-fund: +0.20% S-fund: +0.32% I-fund: +0.77% More returns

The I-fund led the way and has picked up recently after some weakness in the dollar this month.

The S&P 500 looks to be on autopilot again, since bottoming in June and now breaking above the my high, and has been up in 12 of the last 13 trading sessions. This rally's steep incline has lasted for 4 weeks now; about the same length of time as the April / May rally. I'm guessing we'll get some kind of a clue, like we did in May, when we had that high volume negative outside reversal day that licked off the 5% pullback.


Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

The dollar has been bouncing around quite a but the last few months - recently falling from the early July high. It has fallen below the 200-day EMA but it did put in a positive reversal day yesterday. The I-fund is still heavily inversely influenced by the dollar but we haven't had the typical inverse dollar to U.S. stocks correlation that we were accustomed to for the last few years.


Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

But oil has been affected by the falling dollar as the price of a barrel of oil is now up to $107.


Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

Higher oil prices come with a growing economy so it's not always a bad thing to see the price of oil rise, but once it starts to push gasoline prices consistently over the $4 a gallon mark, the consumer will start feeling the pinch.

It is closing in on the 2012 high of $110, and a move above $115 would be a 5-year high. If you recall, the stock market peaked in 2011 and 2012 just after oil moved near $110.


Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

The yield on the long-term bonds have broken below their rising trading channel and dipped below the 20-day EMA yesterday. A couple more closes below that support line and we could be seeing the start of a new downtrend for yields.


Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

That of course would be bullish for bonds and the F-fund since bond yields move counter to bond prices. The long-term bond ETF (TLT) is still trading below the 50-day EMA but you can see that it has also broken its recent trading channel.


Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

This is a possible bullish spot for bonds, but its just a little too early to say.

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

Tom Crowley


Posted daily at TSP Talk Market Commentary

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