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Stocks looking for support, bonds fail

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It was another bad day for the stock market Thursday as the Dow lost 104-points. The Nasdaq held up a better and the small caps actually closed higher. The I-fund was hit hardest and bonds (F-fund) also dipped.

Daily TSP Funds Return
G-Fund: +0.0063%
F-fund: -0.14%
C-fund: -0.35%
S-fund: +0.19%
I-fund: -1.24%
The I-fund was the big loser as it played a little catch up after holding well the prior day, and it was also a victim of strength in the dollar yesterday.

The S&P 500 (SPY) fell below a the support of the rising parallel trading channel (blue). A test of the 50-day EMA seems inevitable, and if there is going to be a Santa Clause rally this year, that would be a nice place to start.


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


The small caps held up well closing up modestly and barely holding at the 50-day EMA. This recent lower low created a new descending parallel trading channel (red) which means a possible new downtrend, although it's not a strong trend at this point. If this chart goes below the November lows (black), that would be more of an official breakdown. What is clear is that the larger rising trading channel (green) has broken down.



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


The
dollar had broken below the descending channel for a couple of days before rallying back on Thursday and recapturing that channel. This chart was looking bearish but this action helped. The problem with a rising dollar is that it will negatively impact the I-fund and we saw that on 1.24% loss on Thursday. The next level of resistance for this dollar ETF is about 21.65.


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

Yields were up and bond prices were down on Thursday and the 7 to 10 year Bond ETF is back down below the neckline of its head and shoulders pattern.


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


This is a negative development at least for the short-term, but as we talked about earlier this week, bond sentiment is getting into extremely bearish territory, which usually means we could see a rally. We'll have to see if the chart pattern or the indicators win this battle.


In today's TSP Talk Plus Report we look at the Sentiment Survey Results and some other survey results. Plus we'll take a look and see what the VIX is telling us. For more information on how to gain access and a list of the benefits of being a subscriber, please go to: www.tsptalk.com/plus.php

Thanks for reading! Next week we'll have to deal with the Fed's FOMC meeting so get prepared, but have a great weekend!

Tom Crowley


Posted daily at www.tsptalk.com/comments.html

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