TSP Talk Blog

Stocks were down on Tuesday, but the action took care of some business that we were looking to get done. The large gap left open from Friday's jobs report was filled when stocks opened sharply lower, but once that gap was filled, the indices found support and rallied back sharply - briefly moving into positive territory, but closed down modestly. The Dow lost 37-points, well off the 180-point loss we saw earlier in the day.

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The S-fund rebounded nicely regaining most of the early losses, and the I-fund held up well thanks to weakness in the dollar. Bonds were up.

The German bund situation in Europe was to blame for the overnight volatility that rolled into Tuesday morning's open. The dollar fell sharply, our bond market sold off, and stocks acted in sympathy, but by the close the U.S. stock market had pretty much stabilized and closed near the highs while bonds also closed slightly higher.

The SPY (S&P 500 / C-fund) filled the large open gap left open from the jobs report on Friday. While the bulls did not like seeing those early losses, as we talked about here yesterday it was probably better to fill the gap first before any breakout so that we don't have to keep looking over our shoulder knowing it is there. The pullback on Tuesday held at the 50-day EMA so technically this is not looking bad at all.


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

The Wilshire 4500 (S-fund) sold off early on Tuesday but created a big positive reversal day that could follow-through into Wednesday's action. The bad news is there is a possible bear flag formed and they tend to break down. Watching the top of the flag for resistance is the key here. A break above 1110 here would go a long was to dismiss the flag.


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

The Dow Transportation index pulled back toward the bottom of the pesky head and shoulder pattern. At the risk of repeating myself, this can break in either direction based on whether this chart is being characterized as being in a downtrend, or if it is still considered being in a bull market. Head and shoulders patterns are more likely to break to the upside in a bull market than in a downtrend.


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

The EFA (EAFE index / I-fund) was down but fairly flat thanks to weakness in the dollar. The European markets were down rather sharply but the weak dollar helped offset that for our I-fund.


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

The dollar looks to haven broken down out of another bear flag. Technically this chart is clearly bearish and trends in currencies can last a long time, but you could also see sharp snap-back rallies on any given day and this one having come down pretty quickly, may be due for something like that as a short-term move. But for now, this looks quite bearish - which should be good for the I-fund.


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

The AGG (bonds / F-fund) was slightly higher yesterday but it was a wild ride for bonds which have fallen out of favor with investors.


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


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

Tom Crowley


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