TSP Talk Blog

After opening on the downside and rallying into the afternoon, stocks ended the day mostly flat on Tuesday. It's a pre-holiday week and while that means the volume might dry up, it doesn't mean the action will be boring. The Dow gained 13.51 points on Tuesday and traded in a fairly tight range.

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The dollar had a big day and that hurt the I-fund, and bonds had another rough one.

Pre-holiday action can be tricky and it can get us leaning the wrong way. Often times the trend is reversed during pre-holiday trading, only to resume after the holiday so any strange behavior has to be taken with a grain of salt. Obviously that makes it tough to analyze.

You can see that historically - going back to 1950 thru 2011, the action can be less than favorable early in the week but improves after the holiday toward the end of next week. Today is trading day # -3.


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

The SPY (S&P500 / C-fund) made a new intraday high but closed just off Monday's all-time closing high. It has now closed above the resistance line - that I have been defining as the breakout line - for 4 straight days. That's a good sign that this breakout is for real, but here comes that tricky pre-holiday trading.


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

The Wilshire 4500 (S-fund) was down slightly yesterday and is still lagging the large caps while trying to reach its April highs.


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

The Dow Transportation Index pulled back quite a bit after hitting overhead resistance. The descending resistance line and the 50-day EMA proved too much for the Tranports, which we have watched with great interest as it plays out its head and shoulders pattern.


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

The EFA (EAFE index / I-fund) was down for a second straight day while not coincidentally, the dollar rallied for a second straight day.


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

The dollar rallied sharply yesterday and it filled another open gap (green box) but in the process it opens a large new gap between 24.80 and 25.80. There's an overhead gap and one below. If the one above gets filled, the 50-day EMA will come into play again. Should that get tested it would go along with the pre-holiday trend breaking theory, which could mean the downside won't resume until next week.


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

The AGG (bonds / F-fund) had another bad day and it fell below the support line once again. The 200-day EMA is being tested for a second time. This ETF has not been below the 200-day EMA since late 2013.


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


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