TSP Talk Blog

Stocks gave investors another scare on Thursday as the Dow was down 130-points just before noon, but we saw a positive reversal and most indices recovered their losses by the close. The Dow ended the day down just 4-points, while small caps actually led the way higher with a solid gain.

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Look for the I-fund to have a big day on Friday since it did not get the benefit of the reversal in U.S. stocks. Bonds (F-fund) put up a negative reversal day after filling a large overhead open gap.

The SPY (S&P 500 / C-fund) was being pummeled again in morning trading Thursday and we saw a little capitulation from the bulls as the sellers dried up and stocks reversed hard to the upside. I believe we could have seen the low for this pullback, but that doesn't mean we won't see a test of Thursday's low and that would certainly spook some of the bulls who are counting on a reversal. The jobs report could have the potential to do that if we don't see the report hit the estimates.


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

The Wilshire 4500 (S-Fund), nearly reached the May lows before reversing to the upside and actually closing with a +0.49% gain. For those of you who have been in the S-fund for a while, that thing in front of 0.49 is a plus sign - meaning you made money. I know... it's been a long time.


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

As we talked about on Thursday, the Russell 2000 (small caps) has been reversing direction at the beginning of each month since July. Should that continue, perhaps we have seen the lows for the month of October?


Chart provided courtesy of www.stockcharts.comm, analysis by TSP Talk

This chart of the Dow illustrates the power of the kangaroo tail reversals. It doesn't necessarily mean the bottom is in, but these big reversals do tend to precede at least short-term tops and bottoms, with strong follow-through in the direction of the reversal.


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

And here is the Nasdaq 100's (QQQ) big reversal day, so it was across the board.


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

The EFA shows the reversal but it trades all day where our I-fund is tracking the EAFE index and that shuts down about 11:30 AM ET, right about when our markets were hitting their lows. That's why I believe the I-fund should have a big day on Friday.


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

The AGG (Bonds / F-fund) ran up and filled the large open gap before reversing back down and falling sharply. It was keying off of the stock market - or was it the other way around? Both reversed around the same time, both had hit extreme levels of being overbought (bonds) and oversold (stocks), and needed to do some back and filling.


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


We get the September jobs report this morning (Friday.) Estimates are looking for a gain of about 205,000 jobs and an unemployment rate of 6.1%. Check the Forum after after 8:30 AM ET to see who won the jobs report contest .

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Thanks for reading! Have a great weekend!

Tom Crowley


Posted daily at TSP Talk Market Commentary

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