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Fed couldn't save market from weak GDP

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Stocks wobbled out of the gate on Wednesday after a much weaker than expected GDP report. Expectations were for +1.0% growth in the first quarter and it came out as +0.2%. The selling subsided in early afternoon trading as the Fed took the stage, but their take was that rate hikes are still on the table this year despite the weakening economy. Investors spent the rest of the afternoon trying to digest that info and the Dow closed down 75-points, which was actually about 100-points off the lows.

Daily TSP Funds Return

All of the stock and bond funds suffered, and the I-fund could have been worse with a major sell-off in Germany, but the dollar dropped sharply too.


The SPY (S&P 500 / C-fund) ducked back under the old resistance line as it can't seem to make up its mind whether to breakout or not. It was an inside day (high lower than previous day's high, and low higher than previous day's low), which is considered a continuation pattern. It remains above the 20 and 50-day EMA's but clearly there are some cracks in this market as the breakouts are having trouble holding.


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


The Wilshire 4500 (S-fund) is still above the 50-day EMA but the old support line, which originally broke on Monday, may now want to act as resistance.


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


The Dow Transportation Index fell sharply and fell below the short-term rising support line, but it did close above it. It's also above the important 8600 level and the 200-day EMA. It's a little early, but this could be the head of a head and shoulders pattern.


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


The
EFA (EAFE Index / I-fund) pulled back a little more and is now back within the rising trading channel. Anyone getting a little nervous? There are cracks all over, but nothing has broken yet.


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


Well, except for maybe the German DAX which fell below the 50-day EMA after breaking down from a bear flag. This is one of the major components of the I-fund.


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


In the I-fund's corner however, is the breakdown in the dollar which is providing a bit of a cushion. The I-fund was down just 0.58% yesterday despite the DAX being down 3.2%, and it was the 0.87% drop in the dollar that helped. The dollar did close well off the lows and has an open gap overhead, so a little bounce in the short-term is very possible.


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



The May seasonality chart kicks in on Friday the 1st.


Chart provided courtesy of www.sentimentrader.com

The "Chart of the Day" shows why "Sell in May and Go Away" has been a popular saying on Wall Street. Most of the gains for the last 50+ years have come in November through April.



The AGG (bonds / F-fund) gapped lower and fell below the 50-day EMA. This is obviously not very good action for the F-fund.


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 www.tsptalk.com/comments.php

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