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Stocks sell off on Friday

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Stocks sank on Friday and if you asked 5 people why, you'd likely get 5 different answers. I see it as investors getting nervous since the two prior tests at the recent highs failed, so it was a rush for the exit on whatever news was convenient. The Dow lost 279-points, and being an options expiration Friday, volume was very heavy. The good news is, the indices did close off the lows and most of them remained above key support levels.


Daily TSP Funds Return

The dollar lost ground and the TSP owed the I-fund some fair value, so it "only" lost a modest 0.84%. Bonds were up, but it wasn't a rush to safety.


The S&P 500 (C-fund) open sharply lower on Friday opening a new overhead gap just below 210. It hit the lows just after 2 PM ET before testing and rebounding off of the 50-day EMA. So far that's typical bull market action, but the triple top is not. I would have expected to see a breakout after a small dip at a triple top, but Friday's action was little more negative than that. The 50-day EMA did hold, but if that fails there are two other levels of support that would be tested. The 205 area looks like do or die.


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


The weekly chart shows no real issues other than the short-term triple top it is dealing with.


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


The Wilshire 4500 (S-fund) fell down to the short-term support line and it is still comfortably above the 50-day EMA, which held twice in March.


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


The Dow Transportation Index actually held up OK losing just 0.70% and it looks like it is either trying to bottom - and the new rising support did hold, or it forming a large bear flag which usually negotiate their way to a downside breakdown. The 200-day EMA and prior lows are the key areas to watch. We'll see if buyers are still willing to buy in the 8600 area as they've done several times over the last 6-months.


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


The EFA (EAFE Index / I-fund) gapped down and remains in an uptrend, but the rising wedge is starting to dominate. The bulls will want to see this index blast through the 67 area otherwise we will see what a rising wedge usually gives us... a breakdown.


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


The DAX had been leading the I-fund this year as it was making new highs regularly. The big pullback on Thursday and Friday was an eye opener, but it is now testing the lower end of a rising parallel channel and the 50-day EMA.


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


The AGG (Bonds / F-fund) hit the overhead resistance line and backed off again. I'd be surprised if bonds broke out, because it would likely mean the economy is losing steam again. After sluggish economic data years we keep expecting some kind of pop in the economic data but it seems every time we make any progress, things taper off again.


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



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

Tom Crowley



Posted daily at TSP Talk Market Commentary

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